(The following statement was released by the rating agency)
Oct 11 - Fitch Ratings has affirmed the 'AA-' Insurer Financial Strength(IFS) rating of Mutual of America Life Insurance Company (MOA). The RatingOutlook is Stable.
MOA's rating continues to be based on the company's extremely strong balancesheet fundamentals, conservative investment portfolio, and established nicheposition in the small- and medium-sized not-for-profit pension market.
MOA maintains extremely strong and stable risk-based statutory capitalization,relatively low operating leverage, and no financial leverage. The totalfinancing and commitments ratio is zero. Fitch estimates that MOA's risk-basedcapital (RBC) ratio was 444% at June 30, 2012 and expects it to remain wellabove 400% over the medium term.
Fitch continues to view MOA as having one of the most conservative investmentportfolios in the Fitch universe. The company's investments are concentrated ininvestment-grade public bonds, which accounted for about 96% of total bonds asof June 30, 2012. Risky assets ratio, which includes below-investment grade(BIG) bonds, troubled real estate, unaffiliated common stock and Schedule BAassets to total adjusted capital (TAC) was 44% at year-end 2011 compared to 101%for the mutual company peer group. Fitch notes that MOA has very limitedexposure to commercial mortgage related assets at less than 1% of total investedassets.
Fitch views MOA's statutory operating profitability as below average for therating category but notes significant improvement beginning in 2010 due in partto higher asset-based fee income and reduced credited rates. Assets grew 5% inthe first half of 2012. Total net flows, driven by the company's 403(b) and401(k) growth products, were positive as of June 30, 2012.
Fitch's primary concern is MOA's above-average exposure to interest rate riskdue to the focus on spread-based defined contribution pension products. MOA hasreduced crediting rates and increased fees over the past three years to offsetthe impact of low interest rates. MOA's contracts remain competitive relative topeers despite the changes. Fitch believes the company still has flexibility tostrengthen earnings through further reduction of crediting rates. Competitivepressures and 3% minimum guaranteed rates on about one-third of general accountreserves limit that flexibility.
Fitch's ratings also consider MOA's operating profile as a moderate-sizedinsurer competing in the group pension market against competitors that have muchgreater scale and financial resources. MOA's business concentration also exposesit to unanticipated adverse regulatory changes that could have a negative impacton revenue and earnings.
MOA had total admitted assets of $14.1 billion, including general accountinvested assets of $7.6 billion, and TAC of $921 million at June 30, 2012.
Key rating triggers that could lead to a downgrade include an RBC below 400%,adverse regulatory developments that would negatively impact demand for thecompany's pension products, and sustained negative net flows.
Fitch does not anticipate an upgrade in the near-to-intermediate term due toMOA's operating profile.
Fitch affirms the following rating with a Stable Outlook:
Mutual of America Life Insurance Co.--IFS at 'AA-'.
(Caryn Trokie, New York Ratings Unit)