OREANDA-NEWS. September 29, 2015.  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 is based on the company's established strong niche position in the small to midsized not-for-profit pension market, extremely strong balance sheet fundamentals and conservative investment portfolio. Rating concerns include MOA's modest, albeit improved, operating profitability, narrow operating profile, and the impact of ongoing low interest rates given the company's focus on spread-based annuities.

MOA has a long established niche in the small to midsized not-for-profit qualified pension market. The company has demonstrated its ability to grow over the last few years due in part to pension plan takeovers and rollovers, which helped offset declines in defined benefit and other areas the company has deemphasized over time. Net flows, driven to a large extent by the company's 403(b) and 401(k) thrift growth products, were positive through full-year 2014 but negative for the first six months of 2015.

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. MOA's estimated risk-based capital (RBC) ratio was 460% as of June 30, 2015 and the agency expects it to remain well above 400% over the medium term.

Fitch continues to view MOA as having one of the more conservative investment portfolios in the Fitch universe. The company's investments are liquid and primarily concentrated in investment-grade corporates and Agency MBS. The company's investment-grade public bond holdings account for slightly less than 90% of invested assets as of June 30, 2015. Total risky assets, which include below investment-grade bonds, troubled real estate, unaffiliated common stock and Schedule BA assets, in relation to total adjusted capital (TAC) was well below the industry average at 43% compared with 82% for the industry as a whole. The company does have a growing proportion of their portfolio in NAIC 2 bonds (rated in 'BBB' category) which increases their exposure to downward rating migration on bonds in an adverse credit environment.

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. MOA has continued the reduction in credited rates into 2015 in some of its product offerings. Net income for FY 2014 was \\$59 million, a 20% increase over 2013 levels, and continues to increase in the first half of 2015.

Fitch's rating concerns 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 more narrow business focus also exposes it to unanticipated adverse regulatory changes that could have a negative impact on revenue and earnings.

Fitch's rating also considers the impact of ongoing low interest rates given the company's focus on spread-based annuity products. MOA has used its flexibility to reduce crediting rates and increase separate account fees in recent years to offset the impact of low interest rates. MOA continues to have the ability to lower crediting rates on its large case Thrift, IRA, and FPA accounts, which make up a smaller portion of the company's total product offerings, and doing so will limit the company's future financial flexibility.

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.

Key rating triggers that could result in an upgrade include an enhanced market position and size/scale, sustained capital strength including low operating leverage and high capital quality, and continued low asset risk.

Fitch affirms the following rating with a Stable Outlook:

Mutual of America Life Insurance Company
--IFS at 'AA-'.