AM Best revises outlooks to negative for Mutual of America Life Insurance

OLDWICK: AM Best has revised the outlooks to negative from stable of New York based Mutual of America Life Insurance Company (MofA) due to weakness in business profile, and the volatility in operating earnings.

The credit rating agency, news publisher and data provider specializing in the insurance industry, AM Best affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa-”.

The ratings reflect MofA’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM).

Despite the overall favorable assessment, the negative outlooks reflect a recent weakness in MofA’s business profile, and the volatility in operating earnings.

Risk-adjusted capital and surplus remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), and the company’s use of reinsurance is viewed as modest, along with an investment portfolio of good credit quality and no financial leverage.

The overall quality of MofA’s capital position is positive and sufficient to support its insurance and business risks.

The company’s net income has declined in recent years, mainly due to general account margin compression, some reserve strengthening and slightly higher operating expenses.

The return on equity (ROE) profitability ratio continues to be lower than the industry average, despite MofA not paying taxes.

The company has a competitive position in its target market of providing pension products to nonprofit organizations and small for-profit businesses, although almost all of general account reserves are interest-sensitive, and more than half of total assets are separate account assets.

MofA is continuing to invest heavily in technology to enhance its infrastructure and margins as it expects to grow and gain market share in the near future.

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