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Penn Mutual Life eyes more partnerships as it doubles down on life business

WhatPenn Mutual Life InsuranceCo. internally labeled as its "Decade of Opportunity" isa step closer to coming to fruition.

Atransaction announcedOct. 10 gives the Horsham, Pa.-based company, which offers life insurance andannuity products principally to affluent individuals, professionals and ownersof small to midsized businesses, a foothold in the middle market and couldserve as the precursor for more deals of the kind, said Chairman and CEO EileenMcDonnell.

PennMutual Life agreed to merge with Vantis Life Insurance Co., a Windsor, Conn.-basedprovider of life insurance and annuity products distributed through agreementswith 150 banks and credit unions across a 45-state footprint.

APenn Mutual Life subsidiary acquired LongevityInsurance Co. from Morgan Stanley in November 2015 for $10.4 million incash. McDonnell said the company pursued that deal as a way to organicallybuild a middle-market presence. The target in that deal previously issued lifeinsurance and long-term care products but had not issued any new policies sinceApril 2008. SCOR Global LifeAmericas Reinsurance Co., a subsidiary of SCOR SE, reinsured 100% of Longevity Insurance'sliabilities as of Dec. 31, 2015, leaving it essentially as a clean shell.

McDonnellsaid Penn Mutual Life plans to eventually use the Longevity company and brandto launch a new longevity insurance product line as the opportunity emergedwith Vantis Life to enter the middle market by buying and leveraging anexisting team rather than building one from scratch.

TheVantis Life group, as consolidated by S&P Global Market Intelligence toinclude Vantis Life Insurance Co.of New York, had $258.9 million in net admitted assets and $83.5million in capital and surplus as of June 30. The Penn Mutual Life group,meanwhile, had $22.48 billion of net admitted assets and $1.78 billion incapital and surplus as of June 30.

TheVantis Life group reported $38.2 million in direct premiums and annuityconsiderations during 2015, down from $44.3 million in 2014. A drop infirst-year direct premiums and considerations to $12 million from $20.3 millionwas largely responsible for that decline.

VantisLife saw sales volumes within its core product lines decline during 2015 in adevelopment it attributed in the management's discussion and analysis sectionof its annualstatement to the "midyear exit from one major distributionchannel." Although the company did not identify that channel in thefiling, it previously reported having distributed simplified-issue and guaranteed-issueproducts to the post-retiree marketplace through select independent brokers. Itcontinues to generate premium income through the financial institutions channelthrough three primary methods: licensed platform representatives, financeadvisers and direct response.

Thecompany engaged in a series of transactions Jan. 1, 2015, whereby it recaptureda book of fixed deferred annuities from reinsurers , and Fidelity Security LifeInsurance Co., then reinsured all of its fixed deferred and payoutannuities under a new agreement with GlobalAtlantic Financial Group Ltd.'s Commonwealth Annuity & Life Insurance Co., whichimpacted numerous income statement line items for the year.

TheVantis Life group's direct premiums and considerations increased to $23.4million in the first half of 2016 from $21.1 million in the year-earlierperiod. The Penn Mutual Life group had $1.55 billion in direct premiums andconsiderations for the first half of the year.

McDonnell,citing LIMRA data, said Penn Mutual Life had grown into the U.S. industry's17th-largest writer of new life premiums from No. 38 as recently as 2008. Shesaid the company had "doubled down" on its commitment to term andpermanent life products as the 2010s began during a time in which mutual lifeinsurers had been benefiting from a "flight to quality" and a numberof major domestic competitors had left the market.

Inannouncing the Vantis Life transaction, McDonnell said in a release that shebelieved more life insurers would seek "high-quality partnerships tocontinue to add value to their customers." She elaborated that the needfor those partnerships occurs against a backdrop that includes factors such asincreasing regulation, the rising cost of compliance, technologicaladvancements and sustained low interest rates. Penn Mutual Life, she said,recognizes that "there are products, distribution channels and marketsthat we've not yet reached."

McDonnellobserved that the numbers of advisers and life insurance companies had declinedsignificantly from their 1988 peaks even as the U.S. population has expanded,creating a "huge opportunity" in the domestic life industry forinsurers like the 169-year-old Penn Mutual Life.

"Theneeds have grown greater," she said, "and there are less and lesspeople and companies focused on it."