Supreme Knight's Report

Investments

One of the reasons why we are able to pay generous dividends to our insurance members, even as we donate so much to charity, is the exceptional quality of our financial management, what A. M. Best has called our “strong risk-adjusted capitalization” and our “consistently positive statutory operating results.”

Put simply, we have a rock-solid financial foundation, based on conservative investment practices.

Our Investment Department invests more than $8 million every working day, and continues to do so with great skill and success.

Most of our assets are invested in bonds, and our $11.5 billion bond portfolio is broadly diversified. Fortunately, bond yields have started to recover from the historic lows of a few years ago, and we have been able to increase the return we get in new bond purchases by nearly 1 percent this year.

The average rating on these new purchases is AA-, and we continue our long tradition of putting our assets in an investment-grade portfolio.

Once again, thanks to our conservative investment practices, at the end of 2006 we had no issues in default.

We invest a relatively small portion of our assets in equities. At the end of last year, our common stock holdings totaled $347 million, and our preferred stock holdings totaled $241 million. These carefully chosen stock investments increase our overall investment return.

The stocks are carefully screened, not only for minimizing risk, but also to ensure that we do not invest in companies that violate Catholic teaching.

Our ChurchLoan mortgage program, the smallest of our investment categories, helps local parishes and parochial schools obtain financing at competitive rates for construction and renovation. It also provides us with a good investment return. Last year, we made 21 new ChurchLoans worth nearly $25 million, and our total portfolio at the end of the year was $140 million.

Overall, we received investment income of $719 million last year, for a yield of 5.9 percent. In short, by every measure, it is readily apparent why Standard & Poor’s said once again this year that we had earned its AAA (Extremely Strong) rating because of our “strong capital” position, and our record of “high persistency rates, favorable mortality experience, strong investment returns.”