Life Insurance Dividends and Financial Strength

David O’Malley

By David O’Malley | November 12, 2015

Penn Mutual will be declaring its annual dividend on November 20. We’ve paid a dividend every year since we were founded in 1847, a solid history that has served our policyholders well. I was very gratified that our consistency was recognized recently by an independent source who conducted an industry-wide analysis of the dividends paid by life insurance companies. Penn Mutual was at the top of the rankings, as explained in this post by Brandon Roberts, 2015 Whole Life Insurance Dividend Analysis, on The Insurance Pro Blog.

Dividends are truly the best measure of the performance of a mutual insurance company. The dividends a company can pay to its policyholders serve as concrete evidence of the quality and performance of the company. Dividends are distributions refunded back to you when the performance of your insurance company exceeds expectations. You receive money back because it didn’t cost as much as we expected to provide you insurance.

The three components of dividends at Penn Mutual are:

  • Interest, or how well the firm managed its investments;
  • Mortality, how it managed its risk by good solid underwriting;
  • Expense, how it managed the cost of acquiring new business, maintaining existing policies, and growing its distribution.

Dividends are also a good reason to buy your life insurance from a mutual company. A mutual insurance company has only one key stakeholder–its policyholders. A public or stock insurance company has two stakeholders–first in line are its shareholders, and then its policyholders. And these two stakeholders have competing interests at times. Mutual companies pay dividends to their policyholders, while public companies pay dividends to their shareholders. If you want a permanent whole life insurance policy that has the potential to build cash more quickly, a mutual company is the way to go.

It is the financial strength of Penn Mutual that has made our long history of paying dividends possible. A.M. Best places Penn Mutual among the few life insurance companies that have been rated A or higher for 75 years or more. In fact, we’ve received an A or higher since 1928, an 87-year history. Best’s Ratings are recognized worldwide as the benchmark for assessing an insurance company’s financial strength.

Penn Mutual has maintained our dividend scale for eight straight years, at a time when other companies have been cutting their scales. We even increased it for the majority of our in-force policy owners last year. The dollar amount of our dividend award has also been rising because of the growth in our whole life business.

The company has been doing very well, and we see that trend continuing. 

Dividends are not guaranteed.

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. The information in this material is not intended as tax or legal advice. Always consult your legal or tax professionals for specific information regarding your individual situation.

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