The Dawn of a New Day
On October 30, 2015, the merger of Mutual Trust Holding Company and Pan-American Life Mutual Holding Company was approved, and we officially became Mutual Trust Life Insurance Company, A Pan-American Life Insurance Group Stock Company. For seven months prior to this date, we spoke often about the benefits of the merger as Mutual Trust became a part of the Pan-American Life Insurance Group (PALIG). Some of the advantages we knew would be immediate and easy to recognize, while others were longer term and less clearly defined.
Today, our combined company operates as a mutual insurance holding company with approximately $1billion in revenues, $5.5 billion in total assets, 1.5 million covered lives and 1,650 employees. Additionally, it has $850 million in total capital, providing a sound foundation for the future growth of the organization. These numbers place us firmly in the medium-size category among life insurance carriers, which is important in an industry that values size.
Throughout the process of merging, however, we knew that until we could translate these numbers into tangible benefits to our policyholders, our distribution partners, and even the industry, the advantages of the merger would not fully resonate. The developments that followed and the ones we anticipate in the future have inspired confidence that a new day is dawning for Mutual Trust and PALIG and that the future is bright.
Ratings and Dividends
Shortly after we announced the closing of the merger, Fitch Ratings announced that they had assigned Mutual Trust an “A” Insurer Financial Strength rating with a Stable Outlook. This is significant because Mutual Trust did not have a rating from Fitch previously. They cite “[Mutual Trust’s] stand-alone credit profile reflects its adequate competitive position in the U.S. life insurance market, strong balance sheet fundamentals and modest earnings profile” as being consistent with the assigned rating. However, they specifically cited the completion of the merger as the driver of the rating action.
The good news continued the next day when A.M. Best announced that they had affirmed the financial strength rating of A- (Excellent) for Mutual Trust and revised the outlook to positive from stable. Per the release from A.M. Best, “the revised outlook for [Mutual Trust] reflects the potential for rating enhancement as [Mutual Trust] is integrated into the operations of its affiliates under [Pan-American Life Mutual Holding Company]”.
The revised outlook to positive is great news on its own. The fact that we are now talking about a potential ratings enhancement is extraordinary when you consider that prior to the merger we had been told that an increase in our rating was highly unlikely because of our size. This development, more than any other, captures the essence of what the merger represents – possibility.
The merger positively affected our 2016 dividend payout too. Despite ongoing turbulence in the economy and continually falling interest rates, in 2016 Mutual Trust is increasing its dividend payout. This is due to our excellent financial results through the first three quarters of 2015, improved mortality experience on our currently issued products, and the additional capital flexibility resulting from our merger with Pan-American.
Sometimes 1 + 1 = 3
When two companies merge, the ultimate goal is to create a combined organization that offers more advantages than either company could provide alone. That is certainly the case here. Mutual Trust’s successful new business engine and emerging technical platform re-establishes PALIG’s presence in the U.S. individual life market. The improved access to capital provides Mutual Trust with the ability to expand that presence, support new investments in the business and finance future growth. Today, our combined organization is financially stronger and better able to offer more products to a wider range of people, as well as provide its policyowners, partners in the field and employees with more opportunities for growth than either company could do alone. By combining our forces and resources, we haven’t just benefited our organization; we’ve provided advantages to the industry as well.
While this has been a year of change and transition, much also remains the same. We will continue to be “The Whole Life Company”. Our commitment to participating whole life and the markets which it serves remains firm. The members of the Mutual Trust team, who have built our reputation for excellent service, will continue to serve you from our headquarters in Oak Brook, Illinois. Since its founding in 1904, Mutual Trust has always believed that life insurance should be the cornerstone of every family’s financial plan. We continue to embrace this goal today and look confidently to a bright future as a proud member of the Pan-American Life Insurance Group. [LC]
