AM Best Downgrades Credit Ratings of Mutual of America Life Insurance Company; Issuer Credit Rating Outlook Remains Negative

AM Best has downgraded the Financial Strength Rating (FSR) to A (Excellent) from A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “a+” from “aa-” of Mutual of America Life Insurance Company (MofA) (New York, NY). The outlook of the FSR has been revised to stable from negative, while the outlook of the Long-Term ICR remains negative.

These Credit Ratings (ratings) reflect MofA’s balance sheet strength, which AM Best categorizes as strongest, as well as its marginal operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The downgrade of the Long-Term ICR reflects a revision in the company’s operating performance assessment to marginal from adequate. This revision considers the continuing deterioration and volatility in Mutual of America’s operating performance over the past six years. The negative outlook for the company’s Long-Term ICR reflects the continued weakness in its balance sheet strength assessment, driven by market volatility and continued declines in risk-adjusted capitalization in recent years with increased losses. The stable outlook of the FSR reflects AM Best’s expectation that MofA will take the necessary steps to curb volatility, improve its overall operating performance and strategic business profile going forward, which has experienced some additional weakness, but not enough deterioration to drive the FSR down currently.

Risk-adjusted capital and surplus have declined a bit but remain at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR), with an investment portfolio that is still of good credit quality through the COVID-19 pandemic and without financial leverage. The overall quality of MofA’s capital position is positive and sufficient to support its insurance and business risks. The company’s net income has declined significantly in recent years, mainly due to general account margin compression, realized losses from impairments and significantly higher operating expenses, including additional costs related to business transformation initiatives. The company’s return-on-equity (ROE) ratio remains lower than the industry average, despite MofA 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 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 and margins as it expects to gain market share in the near future.

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 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 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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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