According to Fitch Ratings, the ratings of the midsize mutual peer group continue to be supported by higher levels of capital relative to the broader life insurance industry, reflecting the unique characteristics of mutual ownership.
Compared with stock companies, these mutual insurers generally have a longer-term focus on sustainable returns, while maintaining excess capital versus target levels and rating expectations, the agency said.
Ohio National’s operating performance to total adjusted capital was an outlier in 2021, having benefited primarily from strong investment returns, says Fitch.
It also reported that persistently low interest rates in recent years continue to pressure companies within this peer group and the broader industry, and in several cases, companies chose to exit or reduce sales of interest-sensitive products and increase focus on protection and other capital-light businesses.
Affected product lines include variable annuities with guaranteed living benefits and guaranteed universal life insurance.
Financial leverage among the group tends to be lower than the broader industry, with the exception of Ohio National, which reports a financial leverage ratio in line with the broader life industry, despite a number of insurers in this group taking advantage of favourable capital markets in recent years to issue senior unsecured or surplus notes.
W&SFG’s improved company profile reflects the company’s greater operating scale and diversification, driven primarily from the acquisition of Gerber Life. Fitch’s view of W&SFG’s company profile continues to reflect the company’s strong competitive position across niche market segments and lower-risk product profile.
Ohio National successfully completed its sponsored demutualisation transaction with Constellation Insurance Holdings in 1Q22.
Constellation committed to contribute $500 million of capital into the insurer over a four- year period, which Fitch views as a longer-term positive impact to the rating.
