NEW YORK--(BUSINESS WIRE)--
Fitch Ratings has affirmed the 'AA-' Insurer Financial Strength (IFS)
rating of Mutual of America Life Insurance Company (MOA). The Rating
Outlook is Stable.
MOA's rating continues to be based on the company's extremely strong
balance sheet fundamentals, conservative investment portfolio, and
established niche position in the small- and medium-sized not-for-profit
MOA maintains extremely strong and stable risk-based statutory
capitalization, relatively low operating leverage, and no financial
leverage. The total financing and commitments (TFC) ratio is zero. MOA's
risk-based capital (RBC) ratio was 444% at year-end 2011 and was
estimated at 446% as of March 31, 2012. RBC is expected to remain well
above 400% over the medium term.
Fitch continues to view MOA as having one of the most conservative
investment portfolios in the Fitch universe. The company's investments
are concentrated in investment-grade public bonds, which amounted to
roughly 90% of invested assets as of March 31, 2012. Total risky assets,
which include below-investment grade (BIG) bonds, troubled real estate,
unaffiliated common stock and Schedule BA assets, in relation to TAC
totaled 44% at year-end 2011 compared to 40% in 2010. The increase is
due to an increase in BIGs driven primarily by fallen angels. The
BIG/TAC ratio of 36.5% is still low relative to peers and the industry.
Fitch notes that MOA has very limited exposure to commercial mortgage
related assets at less than 1% of total invested assets.
MOA reported continued improved operating results and net income for the
full year 2011 in line with expectations. Net operating gain and net
income more than doubled in 2011. NGO of $37 million exceeded the
company's projection of $31M million. Net income of $41 million exceeded
the projection of $30 million. First quarter operating income is down to
about $8 million from $11 millionM in the prior year period on flat
revenue growth. On an annualized basis, this is somewhat below plan for
2012. Net income has benefited from modest increases in net realized
Fitch notes that MOA has flexibility to adjust crediting rates paid to
its pension contract holders in order to increase reported earnings and
generate additional statutory capital if necessary.
Fitch's primary concern is MOA's above-average exposure to interest rate
risk due to the company's focus on spread-based pension products. MOA's
margins improved in 2011 due primarily to reduced crediting rates. In
addition, equity market volatility is expected to constrain asset based
fee income. On the positive side, Fitch notes that MOA is not exposed to
reserve volatility related to guaranteed minimum death and living
benefits in its liability structure.
Fitch's ratings also consider MOA's operating profile as a
moderate-sized insurer competing in the group pension market against
competitors that have much greater scale and financial resources. MOA's
business concentration also exposes it to unanticipated adverse
regulatory changes that could have a negative impact on revenue and
MOA has a long-established niche in the small- to medium-sized
not-for-profit qualified pension market. Net flows, driven to a large
extent by the company's 403(b) and 401(k) growth products, have been
positive in 2012 and that is expected to continue for the full year.
Key rating triggers that could lead to a downgrade include an RBC below
400%, adverse regulatory developments that would negatively impact
demand for the company's pension products, and sustained negative net
Fitch does not anticipate an upgrade in the near-to-intermediate term
due to MOA's operating profile.
Fitch affirms the following rating with a Stable Outlook:
Mutual of America Life Insurance Co.
--IFS at 'AA-'.
Additional information is available at 'www.fitchratings.com'.
The ratings above were solicited by, or on behalf of, the issuer, and
therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology', Sept. 22, 2011.
Insurance Rating Methodology
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Fitch RatingsPrimary AnalystCynthia J. CrossonDirector+1-212-908-0863Fitch
RatingsOne State Street PlazaNew York, NY 10004orSecondary
AnalystJulie A. Burke, CFA, CPAManaging Director+1-312-368-3158orCommittee
ChairpersonDonald F. Thorpe, CFASenior Director+1-312-368-2353Media
Relations:Brian Bertsch, +1-212-908-0549 (New York)firstname.lastname@example.org
Source: Fitch Ratings