THE NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY CLAIMS PAYING ABILITY RATING REAFFIRMED AT 'AA'
CHICAGO, Sept. 20 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has reaffirmed the `AA' (Double-A) claims paying ability rating of The New England Mutual Life Insurance Company (TNE). The rating considers key strengths including the company's strong presence in the individual life, small group pension, and asset- management businesses; stable liability profile resulting from the company's loyal career distribution system on individual business and a high proportion of group reserves which are either not surrenderable or are surrenderable with market value adjustments; sound balance sheet and "economic" capitalization; policyholder dividend history; senior management experience and leadership; and the financial flexibility demonstrated by the realization of "hidden value" in its investment management subsidiaries. Weighed against these positive factors are the company's above average exposure to mortgage and equity real estate investments in the current real estate recession, and moderate surplus development because its historical high-dividend paying strategy. TNE is one of the top 20 largest life insurance companies in the U.S., and had admitted assets of $16.4 billion at Dec. 31, 1992. TNE has focused on individual life insurance and insurance related financial services businesses. TNE's subsidiary, New England Investment Companies Inc., (NEIC) is one of the largest asset managers in the country with $44 billion in assets under management outside the general account of TNE. TNE's year-end adjusted surplus (statutory surplus, AVR, IMR and excess valuation reserves) of $723 million, or 4.4 percent of total admitted assets (5.7 percent of general account assets) has remained lower than peer companies on a reported basis because of increased statutory write-downs of mortgage and foreclosed real estate the last two years, and fading opportunities to harvest gains in the equity real estate portfolio. Voluntary writedowns on mortgages and real estate were $66 million in 1992 and $145 million cumulatively from 1989-1992. Improved operating performance offset writedowns, and surplus grew 4 percent in 1992. On Sept. 14, 1993, TNE combined NEIC's operations with Reich & Tang, a publicly traded limited partnership, managing and distributing money market and other mutual funds. The merger will provide NEIC diversification and growth opportunities, and has demonstrated TNE's ability to access the equity capital markets. TNE estimates it will be able to realize "hidden surplus" in NEIC of about $200 million, subject to NEIC Securities Valuation Office approval, by writing up its investment to market value. TNE's operating leverage ratio fell to 16.6 times at year-end 1992 and to about 13.0 times range as a result of the Reich & Tang transaction, based on proforma projections. -0- 9/20/93 /CONTACT: Martha M. Butler, CFA of Duff & Phelps Credit Rating Co., 312-368-3191/
CO: The New England Mutual Life Insurance Company ST: Massachusetts IN: INS SU: RTG
PS -- NY064 -- 3677 09/20/93 12:30 EDT
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|Date:||Sep 20, 1993|
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