Best’s News & Research Service - February 03, 2022 10:10 AM (EST)
AM Best Affirms Credit Ratings of Mutual of Omaha Insurance Company and Its Subsidiaries
- February 03, 2022 10:10 AM (EST)
Oldwick //BestWire// - AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings of “aa-” (Superior) 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” (Excellent) on Mutual of Omaha Insurance Company’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 assesses as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
AM Best views Mutual of Omaha’s balance sheet strength as very strong. The risk-adjusted capitalization is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The consolidated organization’s capital and surplus level reported favorable growth during 2020, which was driven by strong earnings performance, the sale of the Mutual of Omaha Bank and reinsurance transactions. The organization reported continued growth through the third quarter of 2021. The appropriate level of reinsurance has allowed risk mitigation and preservation of capital. Mutual of Omaha’s capital position provides support to risks related to insurance and investments on a consolidated basis.
AM Best also has noted that the organization’s financial leverage was maintained at an appropriate level of approximately 16% with strong interest coverage above 10 times. In addition, operating leverage was within AM Best’s tolerance level. Mutual of Omaha has good financial flexibility and maintains a line of credit through a syndicate of banks, as well as borrowing capacity from the Federal Home Loan Bank of Topeka.
Mutual of Omaha’s operating performance is viewed as strong by AM Best. The organization continues to report favorable consolidated operating results on a GAAP and statutory basis through the third quarter of 2021, which is expected to remain favorable for the full year 2021. The financial results in 2021 were driven by lower year-over-year earnings as a result of elevated mortality and Medicare supplement claims returning to more normal levels, although those remain lower than pre-pandemic, which was partially offset by favorable morbidity, primarily in the Medicare prescription drug product.
AM Best views Mutual of Omaha’s business profile as favorable. The organization is a large and well-established insurance company with a suite of products, distribution network and partnerships that continue to expand and diversify. Mutual of Omaha operates in all 50 states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands. The organization maintains leading market positions in Medicare supplement and top 10 positions in the group and voluntary product segments, as well as favorable growth in retirement services. Mutual of Omaha Bank was sold last year and Mutual of Omaha retained the profitable mortgage operations through its Mutual of Omaha mortgage subsidiary.
Mutual of Omaha has an established formal ERM program that is assessed as appropriate by AM Best. The design of the ERM program allows identification of potential events that may impact the organization, management of risk to remain within its risk tolerances and the achievement of organizational objectives. The program is overseen by the board of directors, management and other personnel, and there is an expansion of its risk culture throughout the organization. Mutual of Omaha has established clear risk appetite statements for guidance, which are embedded in the ERM policy. Economic capital modeling is utilized to assess risks and allocate capital based upon and to help support business decisions. Mutual of Omaha was quick to respond to the pandemic in 2020 and continues to monitor and provide 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” (Excellent) on $300 million 4.297% surplus notes, due 2054
— “a” (Excellent) on $300 million 6.95% surplus notes, due 2040
— “a” (Excellent) 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 Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.