Topeka’s Security Benefit Corp. has almost tripled its assets since 2010, pushing out of the 2007-era economic challenges with a stronger company that is more adept at meeting market challenges, its leader said.
“At the end of 2010, the company had about $12.8 billion of assets; we’re probably closing on $33 or $34 billion now,” said CEO Michael Kiley, who has been with Security Benefit since Guggenheim Partners purchased it in 2010. “There are two things it validates. One, that our strategy to bring new products and expand distribution was right on point, but also the attractive nature of the U.S. retirement market.”
Along with its expanding asset base came increasing numbers of employees. In 2010, the company employed 550 people, and today that number is closer to 1,015, Kiley said. Almost 900 are in the Topeka office.
Sales have seen the same strong growth, he said. In 2010, when Guggenheim began to infuse capital into the company but had little to do with sales figures, SB had sales of $1 billion. “We’ve hit as high as $7 billion a year in the last few years,” Kiley said.
Kiley credited the Security Benefit sale to Guggenheim with infusing capital into the company after the 2007 time period, during which many financial services companies took hits. Newly on the job after working for Guggenheim, Kiley said the company leaders focused on determining the future for Security Benefit.
“The determination was made that they were in the right markets, in fact, one of the most attractive markets, the U.S. retirement market,” he said. But they were focused primarily on the needs of educators and public employees, a market that wasn’t large enough.
Kiley said Security Benefit used the skills it had from those specialty markets and expanded.
“I think our timing was pretty good,” he said. “A lot of companies were sort of licking their wounds while we were in a position to restart the factory, bring new products to market, expand our distribution footprint, and all of that worked very, very well.”
Kiley said the company also has experienced growth in its legacy businesses working with educators and public employers, and is positioned for potential growth through se2, its arm that provides process services for the financial industry. The business began as an effort by Security Benefit to control its own administrative costs, but once the process was determined, company leaders realized there was infinite capacity so they could offer those services to others in the industry.
While se2 accounts for a small percentage of the corporation’s revenue, at this point, Kiley said he thinks that part of the company is poised for growth. While mutual fund businesses began to outsource administrative functions 25 to 30 years ago, the insurance industry is just starting to do so.
“Of 350 million insurance annuity contracts in the U.S., only about 10 percent of them are currently outsourced for administration,” Kiley said. “That’s about to change. And what I think will happen going forward, is we will have an opportunity to be a leader in that space.”
The administrative benefits offered by owning se2 could play out in the future, too. Kiley talked about the company’s strengths in managing income and retirement for baby boomers, many of whom are playing catch-up on their retirement savings. But he also said younger generations will learn from watching their parents, and that market will offer potential.
“Our chairman, Todd Boehly, is a big fan of trying to reach millennials with small deposits of systematic savings,” Kiley said. “This guy’s a genius; he’s a true idea person and was the person who focused in on Security Benefit as an acquisition. That’s going to be a challenge. Small deposits are expensive to administer, so you’re going to do some systems breakthroughs. I think we have a window into efficient administration that could make us an early mover there.”
Innovation remains key to SB’s future, and Kiley said the company is building retirement products that “reflect the income needs of retirees.” For instance, “front-loading” income in the first 10 years of retirement instead of allocating the same amount for every year may be an option.
“Giving someone guaranteed income that stays the same for their entire retirement may not be as attractive as saying, ‘Well, gee, in the first 10 years of retirement, you’re probably going to travel more, spend more, your kids are still going to need your help,’ and maybe you front-end some of that income,” he explained.