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Fitch Affirms Mutual of America's IFS Rating at 'AA-'; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the 'AA-' Insurer Financial Strength (IFS) rating of Mutual of America Life Insurance Company (MOA). The Rating Outlook is Stable.

MOA's rating continues to be based on the company's extremely strong balance sheet fundamentals, conservative investment portfolio, and established niche position 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 total financing and commitments ratio is zero. Fitch estimates that MOA's risk-based capital (RBC) ratio was 444% at June 30, 2012 and expects it to remain well above 400% over the medium term.

Fitch continues to view MOA as having one of the most conservative investment portfolios in the Fitch universe. The company's investments are concentrated in investment-grade public bonds, which accounted for about 96% of total bonds as of June 30, 2012. Risky assets ratio, which includes below-investment grade (BIG) bonds, troubled real estate, unaffiliated common stock and Schedule BA assets 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 limited exposure to commercial mortgage related assets at less than 1% of total invested assets.

Fitch views MOA's statutory operating profitability as below average for the rating category but notes significant improvement beginning in 2010 due in part to higher asset-based fee income and reduced credited rates. Assets grew 5% in the first half of 2012. Total net flows, driven by the company's 403(b) and 401(k) growth products, were positive as of June 30, 2012.

Fitch's primary concern is MOA's above-average exposure to interest rate risk due to the focus on spread-based defined contribution pension products. MOA has reduced crediting rates and increased fees over the past three years to offset the impact of low interest rates. MOA's contracts remain competitive relative to peers despite the changes. Fitch believes the company still has flexibility to strengthen earnings through further reduction of crediting rates. Competitive pressures and 3% minimum guaranteed rates on about one-third of general account reserves limit that flexibility.

Fitch's ratings also consider MOA's operating profile as a moderate-sized insurer competing in the group pension market against competitors that have much greater scale and financial resources. MOA's business concentration also exposes it to unanticipated adverse regulatory changes that could have a negative impact on revenue and earnings.

MOA had total admitted assets of $14.1 billion, including general account invested 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 the company's pension products, and sustained negative net flows.

Fitch does not anticipate an upgrade in the near-to-intermediate term due to MOA's operating profile.

Fitch affirms the following rating with a Stable Outlook:

Mutual of America Life Insurance Co.

--IFS at 'AA-'.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology', Sept. 19, 2012.

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688011

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Fitch Ratings
Primary Analyst
Cynthia J. Crosson, +1-212-908-0863
Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Julie A. Burke, CFA, CPA, +1-312-368-3158
Managing Director
or
Committee Chairperson
Donald F. Thorpe, CFA, CPA, +1-312-606-2353
Senior Director
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com

Source: Fitch Ratings