DUFF & PHELPS: BERKSHIRE LIFE INSURANCE COMPANY CLAIMS PAYING ABILITY RATED 'AA'
CHICAGO, May 3 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has assigned an initial claims paying ability rating of `AA' (Double-A) to Berkshire Life Insurance Company. The rating reflects Berkshire's consistent profitability in its basic product lines, resulting from strong marketing to a targeted segment of the population. The rating also considers Berkshire's reasonable utilization of operating leverage, and its well-managed investment portfolio. Berkshire Life is a mutual life insurance company that was founded in 1851 and is located in Pittsfield, Mass. The company reported statutory admitted assets of $948 million and adjusted surplus of $65 million at yearend 1992. Berkshire specializes in serving the insurance and retirement planning needs of high income individuals and small business owners. The company's product mix is focused in three key areas: individual life insurance, disability income insurance, and small group pension products. The company's individual life products include a highly competitive one-year term, a 15-year step rate plan, and an innovative survivorship life policy. Berkshire distributes its products through career agents operating out of 40 agencies located in major metropolitan areas throughout the country which are staffed by 240 agents. Approximately 3,000 independent brokers are also licensed to sell Berkshire's products. In 1992 the career agency force produced 65 percent of total premium while brokers produced 35 percent. The company has experienced strong operating profitability for the last several years as evidenced by Berkshire's five year average return on assets of 4.7 percent and the average return on adjusted surplus was 8.2 percent. All three major operating segments have generated relatively stable profits over this period. In 1992, statutory net operating income was $4.7 million on net premium and deposits of $199.2 million. Operating leverage, as measured by the ratio of adjusted liabilities to adjusted surplus has been stable for the last several years and was 13.0 to 1 at year end 1992. Invested assets as of Dec. 31, 1992, were distributed as follows: 41 percent bonds, 41 percent mortgage loans, 10 percent policy loans, 3 percent real estate, 3 percent cash and short-term investments, 2 percent equity securities and other investments. The bond portfolio is concentrated on investments in high quality utility and corporate securities. Approximately 20 percent of all fixed income investments are private placements. At yearend 1992, 97 percent of Berkshire's bond portfolio was rated investment grade. Historically, Berkshire has invested in commercial mortgage loans because of the attractive investment yields of mortgages relative to bonds. The company specializes in offering small mortgage loans (between $500,000 and $2.5 million) on industrial, retail, and office properties, primarily in suburban markets. Mortgage loan agreements typically are fully amortizing and are written with call provisions and prepayment penalties to protect Berkshire against interest rate fluctuations. While the investment concentration in mortgage loans is somewhat high, Berkshire's investment performance from mortgage loans has been better than industry norms. At Dec. 31, 1992, 4.3 percent of Berkshire's mortgage loans were either delinquent, restructured or foreclosed, which is much lower than the industry average according to the ACLI of 17.3 percent. While Berkshire has been required to restructure loans and take control of some properties due to current market conditions, the company is earning significant returns on restructured loans and properties acquired in satisfaction of debt. -0- 05/03/93 /CONTACT: James B. Auden of Duff & Phelps Credit Rating Co., 312-368-3146/
CO: Berkshire Life Insurance Company ST: Massachusetts IN: INS SU: RTG
AH -- NY066 -- 3802 05/03/93 12:29 EDT
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|Date:||May 3, 1993|
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