AM Best Revises Outlooks to Negative for Mutual of America Life Insurance Company
March 1, 2023 by AM Best
OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Mutual of America Life Insurance Company (MofA) (New York, NY).
These Credit Ratings (ratings) reflect MofA’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, favorable business profile and appropriate enterprise risk management.
The negative outlooks reflect AM Best’s concern over the company’s business profile and the overall shift in its potential product offerings, as well as the build out of its infrastructure, along with the continued pressure on the company’s operating performance metrics. Furthermore, there has been some weakness in MofA’s balance sheet strength, driven by market volatility and declines in risk-adjusted capitalization with continued increased losses. AM Best’s expectation is that MofA will continue to execute on the necessary steps to curb volatility, and improve its overall operating performance and strategic business profile in the near future. MofA’s business profile has experienced some additional weakness as well, but not enough deterioration to drive any further changes to the rating at this time.
The company’s risk-adjusted capitalization is projected to remain at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s investment portfolio has begun shifting toward privately managed investments. The company’s net income has declined significantly in recent years, mainly due to general account margin compression, and continued significantly higher operating expenses from settlement accounting, including additional costs related to business transformation initiatives, which is being addressed by the company. MofA’s profitability remains below the industry average, despite it not having a tax liability.
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 its general account reserves are interest-sensitive, and more than half of the total assets are separate account assets. MofA is continuing to invest heavily in technology to enhance its infrastructure, sales efforts and margins as it still expects to gain market share in the near future. AM Best will continue to closely monitor the company’s results, as it continues to execute on its business strategy going forward.
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