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DUFF & PHELPS: REAFFIRMS CLAIMS PAYING ABILITY RATING FOR PROVIDENT MUTUAL LIFE INSURANCE, PROVIDENTMUTUAL LIFE & ANNUITY INSURANCE; CONTINENTAL AMERICAN LIFE INSURANCE COMPANY CLAIMS PAYING ABILITY RATING WITHDRAWN

 CHICAGO, Aug. 10 /PRNewswire/ -- Duff & Phelps Credit Rating Co. reaffirms the `AA' (Double-A) claims paying ability rating of Provident Mutual Life Insurance Company (PMLIC), and it's wholly owned subsidiary Providentmutual Life & Annuity Insurance Company (PLACA). Duff & Phelps previously rated Provident's wholly owned subsidiary Continental American Life Insurance Company (CALIC) `AA-' (Double-A-Minus) but the subsidiary has been merged into its parent and the rating was withdrawn. The PMLIC and PLACA ratings reflect the combined companies' (Provident Mutual's) (1) sound financial management, (2) high quality bond portfolio and well-defined investment and asset/liability strategies, (3) improved operating profitability because of home office and field expense initiatives and policyholder dividend actions, (4) strong competitive position in the variable life insurance and more focused business plan, and (5) reasonable capitalization and operating leverage levels. Weighed against these positives is a trend of increasing defaults and income loss in Provident Mutual's mortgage and investment real estate portfolios.
 Provident Mutual offers a diversified range of individual life and annuities, group pension products and mutual funds. Consolidated admitted assets and adjusted surplus were $4.1 billion and $233 million respectively, at Dec. 31, 1992. Consolidated net operating earnings of $26 million in 1992, produced a return on assets of 2.74 percent and return on surplus of 11.8 percent, up from 2.53 percent and 9.6 percent respectively the previous year. Surplus formation was modest prior to 1992 because of a strategy to pay operating earnings to policyholders through dividends. Consolidated adjusted surplus increased 10 percent in 1992, and at 5.6 percent of admitted assets, is considered reasonable for the rating category.
 Provident Mutual's profitability has been driven by individual life insurance and the company's early entrance into variable life has allowed it a competitive position among companies many times its size. Fixed and flexible premium variable life products now account for 58 percent of new life premium and rank Provident Mutual eighth in variable life sales. The returns Provident Mutual has targeted for individual life should be achievable through the adjustments to expenses and dividend scale that have been taken, but the returns targeted in pension and annuity lines will require the achievement of critical mass and sales momentum. Wholly owned subsidiary PLACA, with $375 million in invested assets at Dec. 31, 1992, is responsible for the marketing and administration of annuities. Annuity production has been stagnant for the last few years due to the economic recession; sales in 1992 were a $55 million. PLACA continues to seek acquisitions of blocks of in-force business to lower unit costs and reach critical mass; in 1992 the company purchased a $100 million block of SPDAs. In group pension, the company focuses on sales of the "Select or Series", a multi-funded product with investment options including variable accounts and two guaranteed options; a GIC or a fixed-maturity, experience-rated, benefit-responsive fixed income fund. New deposits in 1992 were $130 million in Selector (up 7 percent) and $80 million in GICs.
 -0- 8/10/93
 /CONTACT: Martha M. Butler of Duff & Phelps Credit Rating Co., 312-368-3191/


CO: Provident Mutual Life Insurance Company; Providentmutual Life &
 Annuity Insurance Company; Continental American Life Insurance Co. ST: IN: INS SU: RTG


SH -- NY047 -- 1170 08/10/93 11:53 EDT
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Publication:PR Newswire
Date:Aug 10, 1993
Words:538
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