DUFF & PHELPS: MUTUAL TRUST LIFE INSURANCE COMPANY CLAIMS PAYING ABILITY RATING REAFFIRMED AT 'AA-'
CHICAGO, Oct. 29 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has reaffirmed the claims paying ability rating of Mutual Trust Life Insurance Company (Mutual Trust) at 'AA-' (Double-A-Minus). The rating reflects Mutual Trust's high quality investment and mortgage portfolios, experienced management team, good underwriting results, efficient low- cost operations, and conservative operating leverage. These positive factors are offset by a low after-tax profitability record over the recent period of growth, and the company's moderate size. Mutual Trust, established in 1904 and headquartered in Oak Brook, Illinois has had a long history of successfully marketing individual life insurance products. The company has never tried to "be all things to all people" and therefore is not in the individual health, group life and health, and group pension businesses. Following a management change in 1986, the company successfully undertook a five-year plan that built its sales force, broadened its premium revenue base, and cut unit costs. Annuities (primarily SPDAs) grew from 15 percent to 46 percent of premium income from 1986 to 1991, while at the same time total premium income grew at a 20 percent compound growth rate. Because of the surplus strain associated with this rapid growth in new business, in 1992 the company adjusted its focus to emphasize after tax profitability and capital growth. Consequently, there was a planned reduction in 1992 annuity sales, while 1992 life premium grew by 4 percent over the prior year. Mutual Trust generated above-average profitability as expressed by return on average assets (before federal income tax and policyholders' dividends) during the most recent five year period and in 1992 of 2.95 percent and 2.79 percent, respectively. Return on adjusted surplus (after federal income tax and policyholders' dividends and before realized capital gains) has been a relatively low 4.9 percent over the 1988-1992 period, and in 1992 was 3.8 percent. The return on adjusted surplus has been impacted by the surplus strain associated with rapid growth, by the company's strong surplus to liabilities ratio, and in 1992 by an under accrual of year-end 1991 policyowner dividend liability. In 1992, general insurance expenses were reduced to their lowest level in five years, evidencing the company's commitment to cost control, and policyholder dividend scales were reduced to reflect the lower interest rate environment. Profitability is expected to improve for the next few years since sales growth has leveled off and persistency has improved. -0- 10/29/93 /CONTACT: John F. Bareiss of Duff & Phelps Credit Rating Co., 312-368-3162/
CO: Mutual Trust Life Insurance Company ST: Illinois IN: SU: RTG
WB -- NY034 -- 8453 10/29/93 11:23 EDT
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|Date:||Oct 29, 1993|
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