Old Mutual Life Insurance Company Review

For many Americans who may not have heard of this South African company turned financial services giant, a name like “Old Mutual” might seem like a misnomer. Well, it is, as it’s no longer mutual. However, rest assured Old Mutual Life Insurance is indeed quite old and absolutely global.

Old Mutual currently has a rating of A- (excellent) from A. M. Best, a third party industry standard for measuring financial strength. It also holds a BBB- (adequate) rating from Fitch for claims paying ability, and a Baa3 (adequate) rating from Moody’s for financial strength.

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History and structure

Old Mutual Life Insurance was founded in South Africa in 1845 as the Mutual Life Assurance Society of the Cape of Good Hope by John Fairbairn, who in addition to his insurance pursuits was instrumental in establishing the education system in present-day South Africa. Originally based in Cape Town, the company has since relocated its world headquarters to London.

Starting in the 1970s, Old Mutual made a number of acquisitions worldwide, increasing its presence in the banking and investment sectors as well as insurance. Between 1997 and 2000 Old Mutual acquired the British stockbrokers Capel-Cure Myres and Albert E. Sharpe, and the American financial services businesses Gerrard Group and United Asset Management.

These acquisitions culminated with the 2006 acquisition of Skandia, a major Swedish insurance company with a presence in several countries. Although Old Mutual does operate a large property and casualty insurer in South Africa, especially after acquiring Skandia most of its insurance interests overall are in life insurance and annuities.

Old Mutual demutualised in 1999 and is currently listed on stock exchanges in Great Britain, South Africa, Zimbabwe, Malawi and Namibia. Today Old Mutual and its subsidiaries operate in Europe, China, India, Latin America, Africa and North America.

A separate investment firm, Old Mutual Asset Management, operates out of Boston. This business operates on a so-called “multi-boutique” model with 18 affiliated investment companies under its auspices. Old Mutual also has a substantial business interest in Bermuda.

In the United States Old Mutual Life Insurance operates as OM Financial Life Insurance Company in most of the country and as OM Financial Life Insurance Company of New York in New York state due to that state’s unique legal environment. The company’s US headquarters is in Baltimore. Old Mutual Life Insurance is estimated to have approximately $109 billion worth of life insurance in force as of the end of 2009. Old Mutual employs an independent, non-captive agency force.

Universal life

The following product discussions are intended to be a generic representation of the policies Old Mutual Life Insurance offers. Not all products may be available in every state as described. In addition policy features and underwriting requirements may change without notice. Consult with an Old Mutual Life Insurance agent for the most up-to-date information.

Although Old Mutual sells life insurance in many countries worldwide, its life insurance choices in the United States are modest at best. In fact, Old Mutual Life Insurance doesn’t offer a single term or whole life insurance product in this country. With no affiliated broker/dealer, variable products are off the table as well. Instead both of its life insurance lines are indexed universal life products, or permanent universal life insurance with its cash value based on the performance of a stock index.

The main line of Old Mutual Life Insurance products is the OMLife-Choice brand. This IUL is pegged to the Standard and Poor’s 500 index, offers 100 percent participation, features a guaranteed interest floor and ceiling, and a no-lapse premium guarantee to age 120. An extended maturity option guarantees the full death benefit as long as at least $1 remains in cash value. The policies are available in level or increasing death benefit options, the former providing a straight face value death benefit and the latter providing a total death benefit of the face value plus the cash value. A flexible, adjustable death benefit is available if the insured qualifies for preferred rates.

Riders available on the OMLife-Choice include accelerated death benefit, waiver of premium, accidental death benefit, children’s term insurance and an “Ultimate Income Rider” which allows the policy to pay the death benefit to the beneficiary over time similar to an annuity.

The other Old Mutual Life Insurance brand, OMLife-Elite, is also an IUL and operates very similar to the OMLife-Choice, but with more loan options on the cash value. Options and riders are very similar as well.

Annuities

As might be expected for a company that has a substantial interest in banking and investments in its European and South African base, Old Mutual Life Insurance places a strong emphasis on its annuities. However, as with its life insurance, given the absence of a broker/dealer there are no variable annuity options with Old Mutual.

Available fixed annuities are the single premium, or one-pay, deferred OMGuarantee-Platinum and the more traditional OMGuarantee-Plus. Both require at least $5,000 to start ($2,000 for qualified plans) and contractually guarantee a certain rate of return over time.

The fixed indexed annuities – sold under the Accelerator, Escalator, Safety and Spectrum names – are based on the Standard and Poor’s 500 index with guaranteed interest ceilings and floors, much like Old Mutual’s IULs. Several of the products are single premium annuities. Vesting timetables range from six to 10 years. Some of these products offer a percentage bonus of the initial annuity premium which vests in the product over time. There are some products specific to New York state due to its legal environment.

Old Mutual offers a single premium immediate annuity (SPIA), or an annuity that moves to the distribution phase immediately instead of over time. The OMImmediate-Income SPIA is the choice designed for people who require an SPIA without any particular extenuating circumstances.

A special single premium immediate annuity available from Old Mutual Life Insurance, the OMImmediate-Safeguard, is specifically designed to allow the annuitant qualify for Medicaid, making it a option for individuals facing a nursing home stay or other long-term care scenario.

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