Last week we, like much of the insurance industry, were shocked to learn that the Shenandoah Life Insurance Company entered receivership. Shenandoah Life, like AIG and other distressed companies, lost a significant amount of its value from the decline in its mortgage related investments.
At PSM our diverse portfolio includes more than 25 insurance carriers, so our business will see a minimal impact from this latest industry development. However, like many of you and your clients, we are now questioning our past assumptions as to which companies are truly stable.
Recently, Mutual of Omaha sent out a report to its customers conveying information regarding its financial stability as a means of reducing any fear or doubt. Here are a few key highlights from the report:
* $2.2 billion in statutory surplus
* $1.5 billion in cash flows generated each year from investments
* Only 1% of investment portfolio exposed to subprime collateral
* Only 4% of fixed income portfolio exposed to financial industry debt
* 80% of portfolio invested in highly rated bonds
* S&P AA- (very strong)
* A.M. Best A+ (superior)
* Moody’s Aa3 (excellent)
* No credit default swaps
* Increased demand for fixed insurance products such as annuities
* Currently has no securities out on loan
With Forbes and other news organizations advising the public to switch over to or stay with highly rated insurance companies for the foreseeable future, we believe that companies such as Mutual of Omaha will see increased demand for their products. Now in its 100th year, Mutual of Omaha continues to prove itself a rock amidst a sea of change.