Ratings of Penn Mutual and Subsidiary Affirmed by A.M. Best

Published: Tue 26 Jan 2010

Wendy Blair

Citing the corporation's diverse business profile, solid-risk adjusted capitalization, and large excess surplus, A.M. Best recently affirmed the ratings of The Penn Mutual Life Insurance Company and those of its subsidiary based in Delaware.

The financial ratings company declared that it affirms Penn Mutual's financial strength rating of "A+" (Superior) and its issuer credit ratings of "aa-" as well as those of Penn Insurance and Annuity Company of Wilmington, Delaware. A.M. Best announced that the outlook for all of the Horsham, Pennsylvania-based Penn Mutual Company's ratings is stable.

A.M. Best pointed out that Penn Mutual's solid risk-adjusted capitalization and large excess surplus position have improved from basically positive operating trends and the solid performance of a conservative fixed-income portfolio of investments. Best commented that it has seen that the majority of mutual life insurers have withstood the economically trying times more successfully than their publicly-traded cohorts.

The ratings company also acknowledged the diversified business portfolio of Penn Mutual, as the profile markets an array of life insurance products, such as term, whole, variable universal, and fixed universal life insurance policies. A.M. best pointed out that both variable and fixed annuity products "complement [Penn Mutual's] core ordinary life businesses."

A.M. Best also acknowledged the corporation's "well-established affluent market presence developed through its focus on relationship-oriented producers and its well defined investment hedging programs, asset/liability management and cash flow analysis techniques."

Partly counteracting these positive forces, Best said, are the difficulties Penn Mutual faces to develop and sustain its operating performance.

A.M. Best noted several issues in recent years, such as the consequences of the present low interest environment; the corporation's choice to fund AXXX reserving requirements itself; and the latest performances of the equity and credit markets.

The financial rating company also recognized that The Penn Mutual Life Insurance Company has increased exposure to the commercial mortgage loan market compared to its total-adjusted surplus because of its investments in securities backed by commercial mortgage loans.

"While these securities are almost entirely concentrated in the highest rated tranches, are earlier vintages and have a high degree of subordination, A.M. Best believes Penn Mutual is susceptible to moderate investment losses should the commercial mortgage market continue to soften," Best said. "However, Penn Mutual's ability to hold these securities to maturity and its strong surplus position partially mitigates A.M. Best's concerns."

Started in 1847, Penn Mutual is the second-oldest mutual life insurance company in the United States. Penn Mutual offers life insurance and annuity products using a national network of financial advisers and producers who work with clients to meet their financial goals. The company's headquarters are located just outside of Philadelphia, Pennsylvania.