Fitch Affirms Mutual of America's IFS Rating at 'AA-'; Outlook Stable

Fitch Ratings has affirmed the 'AA-' Insurer Financial Strength (IFS) rating of Mutual of America Life Insurance Company (MOA). The Rating Outlook is Stable.

KEY RATING DRIVERS

MOA's rating continues to be based on the company's extremely strong balance sheet fundamentals, conservative investment portfolio, and established niche position in the small and medium-sized not-for-profit pension market. Rating concerns include MOA's modest, albeit improved, operating profitability, narrow operating profile, and above-average exposure to interest rate risk.

MOA maintains extremely strong and stable risk-based statutory capitalization, relatively low operating leverage, and no financial leverage. The total financing and commitments ratio is zero. Fitch estimates MOA's risk-based capital (RBC) ratio was 439% at Sept. 30, 2013 and the agency expects it to remain well above 400% over the medium term.

Fitch continues to view MOA as having one of the most conservative investment portfolios in the Fitch universe, which is an important factor in its rating. The company's investments are concentrated in investment-grade public bonds, which accounted for about 96% of total bonds as of Sept. 30, 2013 (same as year-end 2012).

MOA's risky assets ratio, which includes below-investment grade (BIG) bonds, troubled real estate, unaffiliated common stock and Schedule BA assets to total adjusted capital (TAC) was 36% at Sept. 30, 2013, a small increase from 32% for year-end 2012. MOA's risky asset ratio is significantly lower than the ratio of 100% for the mutual company peer group. Fitch notes that MOA has very limited exposure to commercial mortgage related assets at less than 1% of total invested assets. Exposure to RMBS is higher than the industry average at 27% of invested assets, but they are highly rated and almost 100% in agency pass-through securities.

Fitch views MOA's statutory operating profitability as below average for the rating category but notes significant improvement beginning in 2010 due in part to higher asset-based fee income and reduced credited rates. Assets grew 8.5% in 2012 and 9.2% in the first nine months of 2013. Total net flows, driven by the company's 403(b) and 401(k) growth products, were positive for 2012 and in the first nine months of 2013.

Fitch's rating concerns also include MOA's above-average exposure to interest rate risk due to the focus on spread-based defined contribution pension products. MOA has used its flexibility to reduce crediting rates and increase fees in recent years to offset the impact of low interest rates. However, MOA's contracts remain competitive relative to peers despite the changes. Future flexibility to change crediting rates is limited on about one-third of general account reserves due to the restrictions of MOA's minimum guaranteed rates.

Fitch's ratings also consider MOA's operating profile as a moderate-sized insurer competing in the group pension market against competitors that have much greater scale and financial resources. MOA's business concentration also exposes it to unanticipated adverse regulatory changes that could have a negative impact on revenue and earnings.

MOA had total admitted assets of $16.0 billion, including general account invested assets of $8.0 billion, and TAC of $1 billion at Sept. 30, 2013.

RATING SENSITIVITIES

Key rating triggers that could lead to a downgrade include an RBC below 400%, a risky asset ratio above 75%, adverse regulatory developments that would negatively impact demand for the company's pension products, and sustained negative net flows.

Fitch does not anticipate an upgrade in the near-to-intermediate term due to MOA's operating profile.

Fitch affirms the following rating with a Stable Outlook:

Mutual of America Life Insurance Company

--IFS at 'AA-'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Nov. 2013).

Applicable Criteria and Related Research:

Insurance Rating Methodology - Effective Sept. 19, 2012 to Oct. 18, 2012

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688011

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=817632

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Fitch Ratings
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Bruce E. Cox
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