End of Year 2017 Financial Highlights

Penn Mutual achieved another year of solid financial results in 2017, following our strong performance in 2016. 2017 was our best year ever for life insurance sales. GAAP Net Income grew for our eighth consecutive year and, 2017 represented our tenth consecutive year of growing or maintaining our annual dividend scale. Penn Mutual maintained an A.M. Best Rating of A, which we have done for more than 85 years*.

Our sustained financial strength and mutual structure allow us to stay focused on what matters most — serving the best interests of our policyholders, as well as ensuring our long-term viability and wellbeing. Total benefits paid to policyholders or their beneficiaries in 2017 totaled $1.3 billion, which reflects the fulfillment of our promises to them.

GAAP Financial Performance

Total Operating and Net Income are $580.9 million and $594.0 million, respectively, for 2017.

The 2017 Tax Cuts and Jobs Act signed into law in December 2017, reduced the corporate tax rate, which resulted in estimated one-time impacts related to the re-measurement of our deferred tax liability. Those impacts increased Operating and Net Income by $367.9 million and $362.1 million, respectively. The following results are excluding the one-time estimated impacts related to the 2017 Tax Cuts and Jobs Act.

Operating Income, which includes our insurance products, asset management, and broker-dealer businesses, for 2017, was $254.7 million, an increase of 19% compared to 2016.

Total Revenue supporting our insurance operations was $2,138.6 million for 2017, an increase of $236.9 million compared to 2016. The increase was the result of higher product revenue generated from the growth in our life and annuity business as well as higher investment earnings from our growing assets.

Consolidated Net Income for 2017 was $231.9 million, excluding the one-time estimated impacts related to the 2017 Tax Cuts and Jobs Act, which is a 10% increase from 2016.


Financial Strength

Total Surplus (Capital) totaled $1.9 billion as of December 31, 2017 and was consistent with December 31, 2016. Surplus is the amount we set aside for unexpected losses and is our financial protection against business volatility. The company continues to heavily focus on managing our financial strength and giving confidence to policyholders that Penn Mutual is well positioned to meet its obligations today and well into the future. Total Surplus (Capital) decreased by the impact of the re-measurement of our Deferred Tax Asset at the lower corporate tax rate.

Statutory Assets and Liabilities — As of December 31, 2017, assets, including the funds we safeguard for our policyholders, totaled $24.6 billion, an increase of 10% from 2016. Total liabilities were $22.7 billion as of December 31, 2017.

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 December 31, 2017, cash and short-term and investment-grade bonds represented 84% 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 and NAIC 2 rated, or investment grade bonds, which was 96% as of December 31, 2017, as classified by the National Association of Insurance Commissioners (NAIC).

Our second largest asset class, “Other Invested Assets and Alternative Assets,” represented 10% of the investment portfolio (excluding policy loans). Included in this growing asset class is our investment in Janney Montgomery Scott, LLC broker/dealer affiliate; 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.

Other Key Metrics

Life Insurance Sales for 2017 were $217.0 million, or 22% higher than 2016. Sales in 2017 continue to have a balanced mix, with 40% coming from whole life.


Individual Life Insurance In-Force of $142.1 billion as of December 31, 2017, is the amount of life insurance protection that Penn Mutual provides to policyholders.

New Annuity Sales for 2017 were $402.4 million. We continue to manage annuity sales in the current rate environment and the role they play in our clients’ financial plans.

These results 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. Annuity sales are reported on a cash basis. Total surplus, statutory assets, benefits paid, and investment portfolio information, are reported according to a Statutory Accounting basis.

*Ratings reflect the rating agency’s assessment of Penn Mutual’s financial strength and claims-paying ability and are subject to change. A.M Best A+ rating is the second strongest of 16 as was affirmed in March, 2017.


© 2018 The Penn Mutual Life Insurance Company, Philadelphia, PA 19172 www.pennmutual.com

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