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Best’s News & Research Service - January 25, 2019 03:39 PM (EST)

AM Best Affirms Credit Ratings of Mutual of Omaha Insurance Company and Its Subsidiaries

  • January 25, 2019 03:39 PM (EST)

Oldwick //BestWire// - 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 absolute and risk-adjusted capitalization historically has been supportive of its insurance and investment-related risks on a consolidated and individual operating entity basis. Risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is assessed at the strongest level.

AM Best believes the company’s operating and financial leverage are manageable as a result of an excess of loss reinsurance agreement with a highly rated third party for the support of its AG48 reserves. While the company typically has maintained a relatively lower risk investment allocation, total real estate-related assets are somewhat higher than industry peers. However, AM Best notes that the company has not reported sizable or unanticipated realized capital losses in recent years.

Mutual of Omaha has reported favorable GAAP operating results, reflecting revenue growth in core lines of business within its individual and group benefits segments. Mutual of Omaha Bank continues to provide synergies to the organization’s operations and contribute to overall operating results. Mutual of Omaha’s core Medicare supplement insurance represents approximately 40% of GAAP individual and group benefits revenues through the later part of 2018. This product concentration exposes the organization to material regulatory and market-related risks associated with this line of business. While GAAP results generally have been favorable, AM Best notes that on a statutory basis, the company’s operating earnings have been impacted negatively. Operating results declined as a result of strain related to new life business growth, higher Medicare supplement loss ratios, increased long-term care claims, and higher employer life mortality. In addition, a change in billing cycles for Medicare supplement customers resulted in a loss. Furthermore, the organization’s start-up Medicare Advantage plans released in 2019 are expected to negatively impact earnings in the near to medium term.

Mutual of Omaha continues to maintain its favorable presence as a large national carrier, with strong brand recognition. It is well-recognized, with a leading market position in the Medicare supplement segment and a top ten position in the group disability and the voluntary product segments, and has reported favorable growth in retirement services. In addition, the organization recently introduced a Medicare Advantage product to Medicare–eligible individuals in select markets and released two Part D Prescription Drug Plans in 49 states and the District of Columbia. The company’s product suite, distribution network and partnerships are becoming increasingly diverse, and lend themselves to the company’s favorable profile.

The ERM program is assessed as appropriate as it utilizes risk-related metrics that are communicated to senior management on a regular basis. Mutual of Omaha has a formalized risk appetite statement, which is supported by its current level of risk tolerance. The organization utilizes economic capital modeling to assess its risks and allocate capital-based and support business decisions. Mutual of Omaha continues to focus on cyber risk capabilities, improve metrics, expand its risk culture throughout the company and has filed an Own Risk and Solvency Assessment (ORSA) report.

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

This press release relates to Credit Ratings that have been published on AM 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 AM 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. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.

Financial Strength Life Insurers Press Release A.M. Best Rating Services, Inc. Insurance Issuer Credit Rating Best's Credit Rating Action Rating Event

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