OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has removed from under review with positive implications and upgraded the Financial Strength Rating (FSR) to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “a” from “a-” of Vantis Life Insurance Company (Vantis Life) (Windsor, CT) and its wholly-owned subsidiary, Vantis Life Insurance Company of New York (Brewster, NY) (collectively referred to as Vantis). The outlook assigned to the FSR is stable, while the outlook assigned to the Long-Term ICR is positive. Concurrently, A.M. Best has affirmed the FSR of A+ (Superior) and the Long-term ICRs of “aa-” of The Penn Mutual Life Insurance Company (Penn Mutual Life) (Horsham, PA) and its wholly-owned subsidiary, The Penn Insurance and Annuity Company (PIA) (Wilmington, DE) (collectively referred to as Penn Mutual). A.M. Best has also affirmed the Long-Term Issue Credit Ratings of “a” on the $200 million 6.65% surplus notes due 2034 and the $200 million 7.625% surplus notes due 2040 issued by Penn Mutual Life. The outlook for Penn Mutual’s ratings is stable.
The rating actions follow Penn Mutual’s completed acquisition of Vantis on Dec. 31, 2016. The upgrades reflect A.M. Best’s view that Vantis benefits from its new position as a subsidiary of Penn Mutual, a larger and financially stronger mutual insurance organization. Prior to the acquisition, Vantis paid off its outstanding surplus note debt, totaling $6.25 million. Vantis operates in the life and annuity insurance space, distributing its products through financial institutions and directly to consumer. A.M. Best expects this to provide opportunity for diversification and additional scale to Penn Mutual. As such, the positive outlook assigned to Vantis’ Long-Term ICR reflects A.M. Best’s belief that the company’s rating could be enhanced further as it integrates into the Penn Mutual organization.
The affirmation of Penn Mutual’s ratings reflects its continued favorable business profile as a key mutual insurer operating primarily in the life and annuity space targeting the affluent market. Penn Mutual’s GAAP and statutory operating results have benefited historically from the diversity of its products and distribution, although new business strain has impacted statutory profitability in recent years. Additionally, fee income derived from its broker/dealer operations has increasingly added to operating profitability.
A.M. Best believes that Penn Mutual’s acquisition of Vantis will further enhance its diversity, as well as be accretive to both revenue and earnings in the near term. While Penn Mutual continues to report strong risk-adjusted capitalization, the company maintains a somewhat elevated level of investment-related risk, attributed to its increasing allocation to NAIC class 2 bond holdings and its higher holding of alternative assets relative to similarly rated peers. However, Penn Mutual has demonstrated a favorable track record of asset liability matching and very good risk management practices. A.M. Best notes that the organization’s self-funding of its AXXX reserves requirements has dampened surplus growth for the past few years.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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