Penn Mutual Plans To Grow, Broaden Its Producer Base

By Cyril Tuohy

InsuranceNewsNet

In a placid corner of a suburban Philadelphia business park, Penn Mutual hums along quietly, efficiently and profitably.

The company has been in business for nearly 168 years, since 1847, when there were only 29 stars on the U.S. flag.

The company is named after William Penn, founder of Pennsylvania, although he predates Penn Mutual by about 150 years. 

But under the leadership of Chairman, President and CEO Eileen C. McDonnell, there’s change brewing with regard to the industry's producer sales force.

McDonnell said recently that the industry must adapt to a business model that appeals “not just to women, but also to the minorities, immigrants and others who already far surpass the number of white male employees in our nation’s workforce.”

In a trenchant remark, McDonnell repeated the truism about the industry and its willingness to change.

“The financial-services industry has yet to get the text message that it’s time to change,” McDonnell wrote in a recent article.  

Penn Mutual works with about 5,000 independent producers and another 700 to 1,000 career agents, said Thomas H. Harris, executive vice president of distribution. Both producer channels have grown over the past several years.

Now, an ambitious expansion of the company’s producer base is underway, as Penn Mutual strives to meet diversity hiring targets and expand its footprint, Harris said in an interview with InsuranceNewsNet at the company’s Horsham, Pa., headquarters.

“We’re producer-driven,” as opposed to marketing- and advertising-driven, Harrison said. And the company intends to remain that way.

Penn Mutual's sales force is made up of about 60 percent independent producers and 40 percent career agents, and the company has no plans to change that ratio, Harris said.

It’s a very different model than at Northwestern Mutual, for example, which relies solely on a career agency model.

 A dual-track system of career agents and independent producers is one that fits Penn Mutual and many other carriers. Some producers like to switch back and forth as their needs change and as they decide what is best for them.

“We want choice for our producers,” Harris said.

The aim is to keep producers within the Penn Mutual fold and to avoid whiplash foisted on producers when carriers shut down their career agency channel for independent producers, only to return to a career agency model years later.

Ratings agencies like Penn Mutual’s distribution structure, Harris said, adding that there’s no danger of the company swinging from one distribution model to the other.

On the career agency channel side, the average age of new producers who signed onto Penn Mutual’s Career Builder contract since 2012 is 33 years old, and 24 percent were women, Harris said.

Overall, 16 percent of the company’s new and experienced full-time agents in the career agency channel are women, so the company is having some success attracting more millennials and women who are new to the business, company executives said.

The mutual structure means that company isn’t as beholden to the quarterly dictates of Wall Street as are the stock companies, and policyholder-owners are happy to give up a bit in terms of shareholder return in exchange for long-term stability.

To an outside observer, Penn Mutual shows no signs of tumult, no evidence of distribution divisions being bought and sold to satisfy public shareholders, and no indication of the revolving door that some life and annuity carriers have become in recent years.

“Boring,” detractors might argue. Perhaps, but company managers note that it is that way by design. In any event, company executives are more than happy to let Penn Mutual’s recent financial numbers do the talking.

The carrier reported consolidated net income of $98.6 million for the first half of the year, an increase from $69.4 million in the year-ago period.

Low interest rates have taken their toll, as they have on most carriers. Life insurance sales were $51.4 million, a drop from $81 million in the year-ago period, the company reported. New annuity sales in the first half of 2014 were $297.1 million, a drop from $373.1 million compared to the year-ago period, the company said.

On Tuesday, the company announced an increase in its dividend scale for a large portion of its whole life insurance business. The 2015 payout, amounting to $41.2 million, is $8 million more than the company’s 2014 dividend award, the company said.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].