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First Quarter 2014 Highlights

Financial Highlights as of March 31, 2014

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For 167 years, Penn Mutual has been driven by our noble purpose to create a world of possibilities. As an original pioneer of mutual life insurance in America, we believe that life insurance is the center of a sound financial plan. Permanent life insurance provides a safety net through the protection it provides, builds cash value to allow you to do more in life, and makes an enduring impact for generations to come.

Penn Mutual is committed to helping individuals, families and small businesses unlock life’s possibilities through life insurance and annuity solutions as evidenced by our recent milestone of reaching $100 billion of life insurance in force. Penn Mutual achieved solid financial results in 2013, and we have continued that position into the first quarter of 2014. Our financial strength and mutual structure allow us to stay focused on what matters—serving the best interests of our policyholders, as well as ensuring our long-term viability and well-being.

GAAP Financial Performance

Operating Income, which includes our insurance product and broker-dealer segments, for the first quarter of 2014, was $54.8 million, an increase of 63% compared to first quarter of 2013.

Total Revenue supporting our insurance operations for the first quarter of 2014 was $341.4 million, an increase of $34.2 million compared to first quarter 2013.

Total Benefits Paid
to policyholders or their beneficiaries as of March 31, 2014 totaled $157.1 million, which reflects the fulfillment of our promises to them.

Consolidated Net Income
for the first quarter of 2014 was $50.7 million, which reflects higher income from the growth in our in-force business, positive equity market trends, lower than expected mortality in our life business, and expense management.

Financial Strength

Total Surplus (Capital) totaled $1.59 billion at March 31, 2014, an increase of $48.1 million from December 31, 2013. Surplus is the amount we set aside for unexpected losses and is our financial protection against business volatility. The company continues to be heavily focused on managing our financial strength. This gives our policyholders the confidence that Penn Mutual is positioned to meet its obligations to them today and well into the future.

Statutory Assets and Liabilities — As of March 31, 2014, assets totaled $18.3 billion and total liabilities were $16.8 billion.

High Quality, Diversified Investment Portfolio

  • Penn Mutual holds a high-quality and well-diversified portfolio of assets with investment-grade bonds representing the single largest class of investments. As of March 31, 2014, cash and short-term and investment-grade bonds represented 88% of the company’s total invested assets (excluding policy loans).
  • With an average credit quality rating of A, Penn Mutual’s bond portfolio holds a high percentage of NAIC 1 bonds, which was 77% as of March 31, 2014, as classified by the National Association of Insurance Commissioners (NAIC). Additionally, Penn Mutual holds a low percentage of below investment grade bonds, which was 2% as of March 31, 2014.
  • Our second largest asset class, “Other Invested Assets and Alternative Assets,” represented 9% of the investment portfolio (excluding policy loans). Included in this growing asset class is our investment in Janney Montgomery Scott, LLC broker/dealer subsidiary; assets associated with our hedging activities, which allows us to manage the guarantees we provide within our living benefits for our clients; and alternative assets, consisting of our investments in limited partnerships.

Sales

Life Insurance Sales as of March 31, 2014 were $21.8 million. Sales in the first quarter of 2014 have a balanced mix with 33% coming from whole life, up from 10% of whole life in first quarter 2013.

Individual Life Insurance In-Force of $100.2 billion at as of March 31, 2014, is the amount of life insurance protection that Penn Mutual provides to policyholders. Once again, this demonstrates that policyholders value the complete value of life insurance - both the protection and the cash accumulation - that our products offer.

New Annuity Sales as of March 31, 2014 were $143.4 million, lower than first quarter 2013 and a reflection of the company’s continuing proactive management of our complementary annuity portfolio in order to properly maintain the proper balance between new sales and reserves for life insurance and annuities.

These results, excluding Life Sales, are reported according to Generally Accepted Accounting Principles in the United States of America (GAAP), unless otherwise noted. Life sales are reported on a life weighted-premium basis. Total surplus, statutory assets and investment portfolio information are reported according to a Statutory Accounting basis.

© 2014 The Penn Mutual Life Insurance Company, Philadelphia, PA 19172 www.pennmutual.com
05/14 | A4YK-0516-01E2

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