A.M. Best Affirms Ratings of The Penn Mutual Life Insurance Company and Its Subsidiary

OLDWICK, N.J. — A.M. Best Co. has affirmed the financial strength rating of A + (Superior) and issuer credit ratings (ICR) of “aa-” of the Penn Mutual Life Insurance Company (PML) (Horsham, PA) and its subsidiary, The Penn Insurance and annual Company (Wilmington, DE). At the same time, A.M. Best has affirmed the debt rating of “a” to $ 200 million 6.65% 30-year notes due 2034 surplus of PML. The outlook for all ratings is stable.
These rating actions are based on the PML higher levels of capitalization, positive operating results consolidated and well-established and focused strategy targeting affluent market. PML has increased its absolute levels of surplus in recent years, leading to high risk-adjusted capitalization in relation to its insurance and investment risks. In addition, PML retains modest leverage, with debt to total capital of less than 15% at year-end 2007. The interest coverage remains strong for the current ratings.

PML maintains a very focused operating strategy, using their core competencies in its individual life, annuity and agent / distributor. The group maintains a balanced and well managed cost structure, which is reinforced by solid earnings performance of Janney Montgomery Scott LLC, its agent / dealer subsidiary. PML’s GAAP earnings attributed to their products insurance agent and distributor segments have been consistent.

Partially offset these strengths are the challenges associated with the impact of current low interest rate environment causing spread compression, which over consistent with modest losses realized and the strain of the legal reserve requirements of its products outside universal use with collateral, has led to some volatility in reported results of its legal, including significantly lower net income reported in 2007. In addition, the highly competitive individual life insurance segment makes maintaining consistent and sustainable growth in revenue and earnings performance defiant.

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