OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings of “aa-” of Mutual of Omaha Insurance Company and its subsidiaries, United of Omaha Life Insurance Company, Companion Life Insurance Company (Hauppauge, NY) and United World Life Insurance Company. Concurrently, AM Best has affirmed the Long-Term Issue Credit Ratings (Long-Term IR) of “a” on the group’s existing surplus notes. The outlook of these Credit Ratings (ratings) is stable. The group collectively is referred to as Mutual of Omaha, and unless otherwise specified, is located in Omaha, NE.
The ratings reflect Mutual of Omaha’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
Mutual of Omaha’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains at the strongest level. The organization continues to report a trend of capital and surplus growth that is supporting its insurance- and investment-related risks on a consolidated and individual operating entity basis. However, Mutual of Omaha has experienced a declining risk-based capital level due to capital strain from new business, which remains within the company’s targeted range. In addition, the ratio of below-investment-grade holdings to capital trended up in 2019. The company has experienced capital risk reduction through reinsurance. Furthermore, AM Best notes that the company’s financial leverage was modest at approximately 10% with interest coverage of four times and operating leverage was within guidelines at approximately 11%.
Mutual of Omaha’s operating performance is viewed as strong as the company continues to report favorable GAAP operating results, although on a statutory basis, the company reported a loss in 2018. However, in 2019, the group returned to profitable operations in aggregate, with all business segments contributing positively to the organization’s strong revenue growth. Operating earnings in 2018 were below expectations, primarily driven by individual life mortality and new business strain. Additionally, the company experienced higher claims in the Medicare supplement line, as well as high startup costs related to its entry into the Medicare Advantage line. These losses were offset by favorable experience in the Workplace Solutions segment, combined with better-than-expected results in corporate-owned life insurance.
Mutual of Omaha is a large and well-established insurer with strong brand recognition operating via a national platform. The organization is well-recognized in the insurance and retirement markets, with a leading market position in Medicare supplement and a leading position in the group disability and voluntary product segments, as well as favorable growth in the retirement services business. AM Best notes that Mutual of Omaha exited the banking segment through its recent sale of Mutual of Omaha Bank. The banking operation was a non-core business and operated as an independent subsidiary. However, Mutual of Omaha retained the mortgage banking business through its subsidiary, Synergy One Lending, and will market the business under Mutual of Omaha Mortgage. Mutual of Omaha’s suite of products, distribution network and partnerships continue to expand and diversify, adding to the company’s favorable business profile.
Mutual of Omaha maintains a formal ERM program assessed as appropriate. The company has clear risk appetite statements that guide the organization and are embedded in its ERM policy. Economic capital modeling is used to assess risks and allocate capital based upon and to support business decisions. The company also maintains an ongoing focus on cyber risk capabilities and expansion of its risk culture throughout the organization.
The following Long-Term IRs have been affirmed with a stable outlook:
Mutual of Omaha Insurance Company—
-- “a” on $300 million 4.297% surplus notes, due 2054
-- “a” on $300 million 6.95% surplus notes, due 2040
-- “a” on $300 million 6.80% surplus notes, due 2036
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