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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 05, 2003 12:00 AM (EDT)
A.M. Best Co. has downgraded the financial strength rating to B (Fair) from B+ (Very Good) of The Philanthropic Mutual Life Insurance Company (PMLIC) (Plymouth Meeting, PA). Concurrently, A.M. Best has affirmed the financial strength rating of B (Fair) of its subsidiary, National Safety Life Insurance Company (NSLIC). The outlook on the ratings is stable.
This rating action on PMLIC reflects weakened capitalization, the decline in net statutory income (primarily as a result of higher death benefits and realized capital losses in its investment portfolio) and the challenges associated with marketing small face products.
Recently, PMLIC's capital position has declined due to the write-downs from holdings of preferred stocks and below-investment grade bonds. As a small mutual company, PMLIC has limited avenues for surplus replenishment beyond operating earnings-which have been very modest-and investment gains. In response to these capital losses, PMLIC has been closely monitoring the credit quality of its portfolio and has shortened the effective duration of its fixed income securities to reduce overall surplus volatility.
Additionally, PMLIC has embarked on a long-term strategic expansion program to expand beyond its core inner city strength to the suburbs and beyond. This includes recent expansions into the neighboring state of Ohio and Washington, DC. As a result, direct premiums, which had been declining in the past, have begun to increase.
A.M. Best anticipates that PMLIC will continue to generate positive sales momentum in the ordinary life market given its established base of current clients and its niche strategy. Nonetheless, A.M. Best remains concerned with the potential volatility in its portfolio, which could cause further surplus erosion.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.