AM Best


A.M. Best Affirms Rating of Penn Mutual Life and Assigns Positive Outlook


CONTACTS:

Jim Peavy

(908) 439-2200, ext 5644


FOR IMMEDIATE RELEASE

OLDWICK, N.J. - AUGUST 24, 2001 03:19 PM (EDT)
A.M. Best Co. has affirmed the A (Excellent) financial strength rating of The Penn Mutual Life Insurance Company (PML), Philadelphia, and has placed a positive outlook on the rating.

The rating is based on the consolidated financial strength and operating performance of the company and its subsidiary, Penn Insurance and Annuity Company. The rating reflects the group's strong operating results from consistent execution of its very focused strategy, well established upscale market presence, balanced and complementary distribution sources, strong asset performance and favorable level of capitalization. The company has achieved significant growth in new life insurance sales together with unit cost reductions over the last five years. Partially offsetting these strengths are the challenges that Penn Mutual faces amidst increasing market volatility to maintain consistent and sustainable revenue growth and earnings performance.

PML's operating strategy is to focus on its core competencies within its individual life, annuity and broker/dealer segments, which enable it to allocate resources in areas where the company is best prepared to compete. As part of its effort to improve its competitive profile, PML continues to focus on growing its insurance business by improving distribution effectiveness in existing field offices and by adding new field offices and increasing its presence in the independent broker/dealer channel. This focus has led to 16% annualized growth in life insurance sales over the last five years while keeping expenses flat. The company continues to address expense levels through the adoption of a corporate culture of continuous improvement and through the reevaluation of all internal processes and activities; it has reduced home office staff count by over 37% since year-end 1995. As a result, PML has made considerable progress in reducing expenses and lowering unit costs.

PML's Producer Value Commitment provides strong value-added support to the distribution system for both career and independent agents, evidenced by higher numbers of agents under contract and improved agent productivity resulting in an increase in new life sales. The commitment to producers includes providing competitive products, a complete package of advanced sales and marketing support and improved field management, which has led to strong gains in life insurance sales. In order to accelerate life insurance sales growth, the company has a strategy to selectively add new field offices to its existing channels. New variable product introductions, strong earnings from Janney Montgomery Scott LLC, its broker/dealer subsidiary, and improvement in unit costs through aggressive expense reductions have contributed to the company's good competitive position in the individual marketplace.

PML's results through mid-year 2001 show the effects of market volatility through reduced revenues and earnings from its broker/dealer segment, as experienced by many of its peer companies. However, due to emphasis on non-transaction based revenue, including money management and retirement planning services, PML has continued profitability even in down market environments. Life sales were down slightly at mid-year, a more modest decline than that experienced by peer companies with similar market profiles, reflecting the value of the relationship based strategy developed over many years. A.M. Best expects that PML's business strategy will allow PML to continue to outperform many of its peers and the industry at large during market cycles.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.

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