Life Insurance

For Life Insurance, Mutuality Matters

If you own a life insurance policy, you may have purchased it from a company with the word “mutual” in its name. At the time, it might not have been a big deal, but hopefully, over the years, you’ve come to learn the value of that simple yet powerful word — mutual.

At Penn Mutual, we emphasize “mutual,” and because of that, for more than 170 years, our policyholders have benefited from their experience with us. Our mutuality has made it possible for us to give hundreds of thousands of Americans the ability to protect their families and businesses while achieving what they want in life.

First in line, not “get in line”

As a mutual company, we are owned by our policyholders, not a group of stockholders who trade in and out of the company. Stock companies need to balance returning value to stockholders with providing value to their policyholders while, at a mutual company, our policyholders are the only ones to share in our excess returns. They’re not only first in line — they’re the only ones in line.

And, they have an advocate in our board of trustees, who stand as their proxy. Our trustees act as the voice of our policyholders, while the board of a stock company acts as the voice of its stockholders.

Policyholders are our priority

Our policyholders are front and center in the minds of everyone at Penn Mutual. Management works for them, and to the extent we have outside returns or generate additional income, we return it to them — and only to them. Sometimes we’re asked if we’d do things that might be “policyholder unfriendly” to boost our return on equity. Our answer is consistent: there’d be no point, because the whole reason we earn a return is to give it back to our policyholders.

Managed for the long term

Most insurance companies will tell you that they want to focus on the long term as much as possible. However, stock life insurers, by their very nature, have to manage their quarterly earnings to keep their stockholders happy. Sometimes, they need to make their short-term financials look more pleasing to their stockholders, so they might have to make decisions that are not advantageous for the long term.

But at Penn Mutual, we’re all about the long term. As CFO, I care about quarterly financials too, but because we don’t have to answer to stockholders every quarter, we can take a consistent, long-term, prudent perspective. Ultimately, that perspective allows us to make decisions that will best serve our policyholders 10, 20 or 30 years from now.

Products that benefit the policyholder

An example of our long-term view lies in our product portfolio. A stock company can’t offer some of the guarantees we have in our products, simply because stock companies don’t have that consistent, long-term perspective. The guarantees we provide can have some short-term volatility, which we’re comfortable with, but that stock companies are hesitant to offer because they’ll have to make their quarterly earnings.

Additionally, because of our long-term perspective, Penn Mutual and other mutual companies can offer whole life insurance and other accumulation products in their product portfolio. Stock companies tend to offer lower-capital products, like variable universal life or product lines where capital market solutions exist, like universal life with secondary guarantees. Penn Mutual policyholders benefit from the best of both worlds. We have a product portfolio that can meet the needs of virtually any policyholder. Typically, in the life insurance industry, companies specialize in one or two product areas. But we have a broad and deep life insurance portfolio — and our mutual structure helps make that possible.

We pay dividends

One of the greatest benefits of being a mutual policyholder is the opportunity to participate in the excess returns of the company through annual dividends. If you’re an eligible policyholder, your dividend is determined by the results of three areas:

  • Our investment yield
  • Our mortality experience
  • Our expense management

Penn Mutual has been paying income-tax-free dividends to our eligible policyholders for more than 170 years, and over the past 20 years, our dividend history has been one of the strongest and most consistent in the industry. If you’re a Penn Mutual policyholder, you know that our dividend track record is one of our best key performance indicators, as well as our record of keeping promises to policyholders.

Strong, steady and sustainable

Our long-term perspective is part of our strategy, but not just for our financials. It’s also how we operate in the marketplace. We manage our policy features, such as dividends, with consistency to limit quarter-to-quarter and even year-to-year fluctuations. Financial strength is a big part of our strategy through a conservative, prudent management style. Our strong, steady and sustainable philosophy resonates with our policyholders, our financial professionals and our employees. And, it resonates with the rating agencies, who consistently and independently recognize our mutual advantage, long-term perspective and financial strength.

We strongly believe that mutuality does matter, and we thank our policyholders across America for the trust they place in us. If you want to learn more about Penn Mutual, I encourage you to contact one of our financial professionals.

This post is for informational purposes only and should not be considered as specific financial, legal or tax advice. Depending on your individual circumstances, the strategies discussed in this presentation may not be appropriate for your situation. Always consult your legal or tax professionals for specific information regarding your individual situation.

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