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Royalty Capital Corporation

Royalty Capital Corporation (“RCC”), an insurance holding company, is incorporated in Illinois. RCC’s business is to provide financing and management for its life insurance subsidiary, Capital Reserve Life Insurance Company (“CRLIC”), and for potential other insurance subsidiaries that RCC may in future charter or acquire.

Industry Overview

The life insurance industry is one of the largest industries in the world. Very few businesses are as closely regulated.  In addition well managed life insurance companies are considered to be one of the most profitable businesses in the world.(1) The life insurance industry can predict its risk using what is known in the industry as the “law of large numbers.” In essence, this means that insurance companies collect premiums from large numbers of people for long periods of time in exchange for a future death benefit. This exchange of money in the present for a future benefit is calculated using life expectancy tables going back over 100 years, making mortality risk highly predictable. This money, or as Warren Buffett calls it, the “float,” is then invested.

There is over 20 trillion dollars of life insurance in force in the United States today, owned by over 75 million families. Life insurance and annuity sales exceeded 3 trillion dollars in 2014 alone.(2) There are over 1,000 domestic life insurance companies that range in size from hundreds of billions of dollars in assets to just a few million. Each is required to follow stringent regulations imposed by its state of domicile. Every year, more than $100 billion in insurance assets, including both insurance companies and blocks of business, change hands through acquisitions.

Illinois and Missouri

Illinois residents paid over $16 billion dollars in life insurance and annuity premiums in 2015, however 92% went to insurance companies domiciled out of state. There are 548 life insurers licensed to do business in Illinois today, but only 70 of them are domiciled in Illinois. Similarly, Missouri residents paid over $8 billion dollars in life insurance and annuity premiums in 2015, however over 85% went to insurance companies domiciled out of state. There are 422 life insurers licensed to do business in Missouri but only 23 of them are domiciled in Missouri.(3)

Ownership of the Company

RCC has approximately 1,000 shareholders, many of whom are Illinois and Missouri residents, including a number of distinguished businesspeople, professionals and agricultural leaders.  This robust shareholder network provides a tremendous insurance marketing opportunity for RCC and CRLIC.

Capital Reserve Life Insurance Company

The CRLIC business plan has two distinct components: First, increase life insurance sales in Missouri, Kansas, and (upon approval) Illinois, and second, acquire life insurance and annuity companies and blocks of life insurance and annuity business. 

CRLIC will use the shareholder base of RCC for leads and referrals to market its forthcoming insurance products. Management’s experience with other companies has proven that this referral network will give CRLIC’s sales representatives a marketing advantage over competitors by providing a large number of quality prospects. The training of representatives will be conducted by senior company personnel who have many years of experience in life insurance sales training.

One of the new insurance products will provide life insurance death benefits, however the primary focus of the product will be to provide living benefits. Management recognizes that expense control is critical for all business operations, especially for early-stage, growing insurance companies, where the high initial cost of new business directly impacts the statutory capital and surplus. For this reason CRLIC will design the product to minimize the surplus strain normally associated with the sale of permanent insurance. The marketing of this product will be conducted by an agency sales force developed by RCC.

CRLIC will market, underwrite and distribute a broad range of individual life and annuity insurance products to individuals. CRLIC’s product portfolio may consist of a modified premium whole life insurance policy with a flexible premium deferred annuity rider, whole life, term life, final expense, pre-need, accidental death and dismemberment and annuity products. These products will be sold through independent agents.

The final expense and pre-need market is a rapidly growing segment in the insurance industry due to the aging of the population of the United States or as some call it, “the silver tsunami.” In the last decade, many people have had their financial security greatly diminished or eliminated. These policies are issued in face amounts from $2,500-$25,000, providing peace of mind for many for “final expense” purposes. Unlike some other products, final expense and pre-need products normally create surplus strain. We may enter into re-insurance agreements to provide surplus strain relief if needed. In addition, CRLIC intends to offer a variety of fixed annuity products. CRLIC’s management believes that fixed annuities offer a safe and easy to understand alternative to ever increasingly complex indexed and variable annuities offered by many companies today.

Life Insurance and Annuity Acquisitions

RCC and CRLIC management has many years of experience in the acquisition of existing life insurance companies and blocks of life insurance and annuity business. CRLIC intends to seek additional acquisitions that meet the company’s guidelines. The practice of acquiring existing life insurance companies and/or blocks of life insurance and annuity policies has proven to be instrumental to the growth and profitability of other companies in which members of CRLIC management have been involved. There are hundreds of billions of dollars in life and annuity blocks of business that are acquired each year. Reasons are varied: ever increasing regulation, lack of capital for expansion, changes to business models, low interest rates, lack of succession plans, or the lack of a clearly defined exit strategy. All represent opportunities for participation by CRLIC.

CRLIC will initially use a third-party administrator for accounting, reporting, record keeping and underwriting services to reduce the overhead of the company. This, with cost sharing of personnel, office space, and equipment with RCC, will enhance CRLIC’s ability to earn a profit in its early years of operations under RCC ownership.

Executive Management

Gregg E. Zahn – Chairman of the Board of Royalty Capital Corporation.  Mr. Zahn is also Chairman of the Board, President, Chief Executive Officer and a member of the Board of Directors of First Trinity Financial Corporation, Trinity Life Insurance Company, Tulsa OK, and Family Benefit Life Insurance Company, Jefferson City, MO. He is also Chairman of the Board and Co-Founder of Texas Republic Capital Corporation. He was the founder of First Trinity Financial and served as a Board Member from 2004-present. From 2004 until October 2007, he was Director of Training and Recruiting for First Trinity Financial. He is Chairman of the Board, President and Chief Executive Officer and Director of First Trinity Financial Corporation, Trinity Life Insurance Company and First Trinity Capital Corporation. He has served as chairman of the Board since 2011 and as President and Chief Executive Officer since 2007. In December of 2011 was appointed Chairman of the Board and CEO of Family Benefit Life Insurance Company. He was Executive Vice President of First Life America Corporation from December 2008 until August 2009. Between 1997 and March 2004, Mr. Zahn served as Marketing Vice President of First Alliance Insurance Company of Lexington, Kentucky and as Assistant to the President of First Alliance Corporation and Mid-American Alliance Corporation. He was President of Alliance Insurance Management from 2001-2003.

John C. Todd – Mr. Todd is President and Chief Executive Officer of Royalty Capital Corporation. Mr Todd has forty years experience in the Insurance and Securities industries. Mr. Todd has been a Regional Director of Texas Republic Capital Corporation, District Manager of First Trinity Financial Corporation, Senior Managing Director of Wealth Management at B.C. Ziegler & Co. and Executive Vice President Sales at Disciplined Investment Advisors. Mr. Todd has been responsible for planning and executing top- and bottom-line goals, building large sales organizations and product development including, sourcing, structuring, and placing in excess of $1 billion of private placements, non-traded public securities and debt instruments. He has served on executive management committees, risk committees, new product committees, and retirement committees. 

William S. Lay ­ – Mr. Lay is Secretary and serves as a director of Royalty Capital Corporation and has served as Director, CFO, Secretary and Treasurer of Great Nation Financial Corporation, a South Carolina Holding Company since inception in August 2010. Mr. Lay is a director of Texas Republic Capital Corporation. Mr. Lay is Vice President and Chief Investment Officer and a Director of First Trinity Financial Corporation, Trinity Life Insurance Company and First Trinity Capital Corporation and served as Chief Financial Officer from April of 2007 through June 2010 and Secretary and Treasurer from April 2007 through March 2011. He is a Director of Family Benefit Life Insurance Company since December 2011. For the past five years, Mr. Lay has been a financial officer and business consultant, specializing in corporate, financial and consulting services for small sized entrepreneurial companies. Prior to that, Mr. Lay was an officer and director of numerous life insurance companies and also has experience in business acquisitions, mergers and reorganizations.

Theodore (Ted) Lung – Vice Chairman of the Board, Mr. Lung, 52, currently serves as the Vice President and National Business Development Manager at AgriLogic Insurance Services. AgriLogic is one of 16 Federal Crop Insurance Providers for the RMA / USDA. Previously, Ted started Midwest Crop Insurance Services, which he successfully grew to having in excess of 70 million in premiums, 170 agents, 25 employees and business in 15 states. He sold his business to AgriLogic in 2011. He has owned many successful independent insurance agencies throughout Illinois.  His insurance career started in 1982 as a senior in high school. Ted served as Vice Chairman at Inspire Capital Corporation and Capital Reserve Life Insurance Company of Osage Beach, MO.  In addition to his insurance business, Ted owns several other businesses in Illinois. 

Sources: (1) The Hidden Way to Wealth, Richard Cole, (2) Life Insurance Facts, (3) Illinois and Missouri Departments of Insurance