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 referred to as Mutual of Omaha) is located in Omaha, NE, unless otherwise specified.
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 is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The organization continues to report a favorable level of capital and surplus to support its risks related to insurance and investments on a consolidated basis. Mutual of Omaha has experienced favorable capital growth, with a notable increase in 2020 as a result of closing on its sale of Mutual of Omaha Bank, reinsurance transactions and strong operating performance, which have all helped increase its risk-adjusted capital levels. The organization also maintains an appropriate level of reinsurance in order to mitigate risk and preserve capital.
Furthermore, AM Best notes that Mutual of Omaha’s financial leverage was appropriate at approximately 16% with substantial high double-digit interest coverage and operating leverage that was within AM Best’s expectations.
AM Best views Mutual of Omaha’s operating performance as strong. The organization continues to report favorable GAAP operating results. On a statutory basis, the group reported a loss in 2019 considerably less than the prior year’s loss. However, in 2020, the organization returned to profitability on both a GAAP and statutory basis with most business segments contributing positively to revenue growth. Operating earnings in 2020 were primarily driven by lower Medicare supplement claims, in addition to favorable morbidity and strong mortgage results offset by higher mortality. The COVID-19 pandemic was responsible for the lower claims utilization and elevated mortality claims earlier in 2020. AM Best expects GAAP and statutory earnings to remain at high levels at year-end 2020.
The organization is a large and well-established insurer, and Mutual of Omaha enjoys strong brand recognition operating in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. The organization is well-recognized in the individual and group insurance and retirement markets across a broad breadth of products, with a leading market position in Medicare supplement and growing positions in the group disability and voluntary product segments; in addition to favorable growth in the retirement services business. In early 2020, Mutual of Omaha completed the sale of Mutual of Omaha Bank, which operated as an independent subsidiary with limited alignment to corporate strategy or integration with the insurance business. However, Mutual of Omaha retained the mortgage banking business through its Mutual of Omaha Mortgage subsidiary. Mutual of Omaha’s suite of products, distribution network and partnerships continue to expand and diversify, establishing the business profile as favorable.
Mutual of Omaha maintains a formal ERM program assessed as appropriate. The ERM program is designed to identify potential events that may affect the entity, assist the company in managing risk to remain within its risk appetite, and provide reasonable assurance regarding the achievement of entity objectives. The organization has clear risk appetite statements that guide 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. It also maintains an ongoing focus on cyber risk capabilities and expansion of its risk culture throughout the organization. Mutual of Omaha responded quickly to the COVID-19 pandemic and continues to provide innovative support to associates, business partners and customers.
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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