2012 Annual Report
Leading the Way
Table of Contents Letter from the Chairman of the Board, 2 President and Chief Executive Officer Leading the Way
Put Retirement Saving on Automatic Inwood House, New York, New York
6
Support Plan Sponsors River City Produce Company, San Antonio, Texas
10
Offer Comprehensive Financial Education 14 The Community Foundation Serving Richmond & Central Virginia, Richmond, Virginia Provide High-Quality Investment Options 18 Children Inc., Covington, Kentucky Help Strengthen Communities
24
Board of Directors
26
Financial and Corporate Information
29
2
mutual of america 2012 annual report
2012 selected financial Data December 31 ($ in millions)
2012
2011
Percentage
change Premiums
1,685.0
1,552.8
48.8
46.5
4.9
General Account Assets
7,904.1
7,604.6
3.9
Separate Account Assets
6,744.0
5,899.9
14.3
14,648.1
13,504.5
8.5
961.5
895.5
7.4
Net Income
Total Assets Total Surplus (including Asset Valuation Reserve) Surplus Ratio*
12.2%
8.5%
11.8%
* Total Surplus as a percentage of General Account Assets 1
leTTer from Thomas J. moran, Chairman of The board, presidenT and Chief eXeCuTive offiCer
as a financial services company, we see firsthand the economic challenges many people face and their determination to work towards a better future.
2012 was a year filled with events, the significance of which will be felt for years to come, including one of the most contentious and expensive national elections in our country’s history, a drought that affected 80% of our nation’s farmland and a devastating superstorm that struck the Northeast. Underscoring these events are the continuing economic challenges that prevail in the United States and globally. The presidential race of 2012 highlighted both the deep divisions within our society and the strength of our democracy. Witnessing the violent uprisings in so many other parts of the world, I think we can all feel proud that our differences are fought with words and the victories won in democratically held elections. With the elections decided, we all join in hoping for the very best for our nation and our fellow citizens. Mother Nature provided us with humbling reminders of how little we truly control. Eighty percent of our nation’s farmland was affected by the worst drought since the Great Depression. As crops failed, food and grain prices continued to rise. Superstorm Sandy leveled communities and claimed many lives. Each of these natural disasters offered a lesson that resonated throughout the country: despite our differences, we depend on each other, and our interdependence is a source of great strength— individually and as a nation. Here in the Northeast, we witnessed firsthand the courage and dedication of our firefighters and police, healthcare workers, public servants and volunteers, who came from across the nation and worked selflessly around the clock to aid storm victims and restore vital services. Just as extraordinary was the planning and effort that went into evacuating close to a million residents before the storm, which saved countless lives. Today, volunteer workers and much needed material aid continue to pour into the affected areas. Every person who has taken part in that effort, by lending a hand or making a charitable donation, is making a difference. 2
Our country is looking for solutions and a way forward out of our economic difficulties. As a financial services company, we see firsthand the economic challenges many people face and their determination to work towards a better future. Our commitment to helping them succeed has never faltered. As a mutual company, we do not answer to shareholders; our efforts are dedicated exclusively to the benefit of our policyholders. However uncertain the economy, we work to ensure our financial strength and stability. Adhering to a consistently prudent, long-term approach to investing and managing our Company allows us to meet our obligations to our customers, now and long into the future. Our financial strength also allows us to keep our fees competitive and to continue to ensure that they translate into real value for plan sponsors—in terms of participation rates, administrative support, employee education and sound investment choices. In 2012, I am pleased to report a number of important enhancements to our plans and services that have the potential to help individuals increase their retirement savings and achieve a financially secure life in retirement came to fruition. At the same time, Mutual of America continues to focus on providing the individual attention and comprehensive education that our customers can use to help them understand their investment choices and make well-informed decisions as they seek to accumulate funds for their retirement years. The strength of a company, like that of a nation, lies in its people. Our Company’s strength is grounded in the intelligence, integrity, leadership and dedication of our employees. From the investment professionals at Mutual of America Capital Management Corporation to the Company’s Regional Office representatives who meet on site with our clients, our employees are people who care. They see up close the difference their expertise makes in the lives of the individuals we serve, many of whom are committed to helping others through their work in nonprofit organizations. Working with the highest ethical standards, our employees do their utmost to help individuals make the most of their retirement plans. 3
ToTal asseTs ($ in billions) general account
separate account
2012
$7.904
2011
$7.605
$6.744
$5.899
$14.648
$13.504
The spirit of caring at the heart of our Company was fully apparent in our response to Superstorm Sandy. With the subways and tunnels of New York City flooded and the bridges unsafe to cross, employees in our home office followed a well-established emergency plan to ensure that the Company provided uninterrupted service to our customers. The spirit of caring is also evident in the annual Mutual of America Community Partnership Award, which recognizes and celebrates partnerships among public, private and social sector organizations dedicated to the public good. One need look no further than Operation Rebound, the Community Partnership Governor Hugh L. Carey National Award winner for 2012, which works with injured veterans, active duty service members and first responders, to appreciate how committed individuals working together can make the seemingly impossible happen—transforming lives and, in the process, rewriting the future. The media has focused a lot of their attention on the divisions in our society. Stronger than our divisions, however, are the values that unite us: courage, caring and a sense of responsibility and service—to our families, friends and the larger society in which we live. This is the spirit of America; these are the values that Mutual of America embraces as a Company dedicated to service.
Thomas J. Moran Chairman of the Board, President and Chief Executive Officer
4
Leading the Way
In 2012, we continued to expand our retirement plan services to encourage more people to save and to help plan sponsors meet their administrative and fiduciary responsibilities. Our products, processes and services, together with our outstanding on-site service and decades-long experience in retirement plans, reflect industry best practices in effective retirement plan implementation, administration and design.
5
Dr. Linda Lausell Bryant, Executive Director, Inwood House (center) with Elizabeth Budabin from Mutual of America’s New York Regional Office and Tyrone Golatt, Senior Regional Vice President. 6
“mutual of america has been a great partner for us. they’ve advised me and my board of directors on how best to structure our retirement plans and help our employees have some security for the future. For us, this is an investment in our people. We can’t deliver our mission without them.”
Dr. Linda Lausell Bryant Executive Director Inwood House New York, New York
7
inwood house NEW YORK, New York
put retirement saving on automatic
Everyone knows that starting early and contributing regularly to a retirement savings plan can better an individual’s chances of building financial security for the future. To help encourage employees to begin saving—and keep saving—for retirement, we introduced automatic enrollment arrangements that sponsors of 401(k) and 403(b) plans can adopt to automatically enroll eligible employees at specified deferral percentages, with the option to automatically increase that percentage up to 10%.
“I’m committed to helping individuals understand how to achieve greater financial security in retirement.” Elizabeth Budabin Mutual of America Associate Account Representative
8
Plan sponsors who adopt an automatic
investment fees, whenever possible. This year,
enrollment provision can default their
we added the Mutual of America 2050
employees into a number of competitive
Retirement Fund to our roster of target-date
investment funds we offer that can serve as
funds to serve younger individuals with a
Qualified Default Investment Alternatives
relatively long time horizon before retirement.
(QDIAs), which, by definition, provide safe harbor protection for ERISA plan fiduciaries.
Research shows that automatic enrollment is a great way to boost plan participation and
Among the funds available as QDIAs are our
contribution levels, benefiting all employees—
very popular target-date Retirement Funds,
particularly young and low-income workers—
easy to understand and cost-effective
especially when coupled with automatic
investment options for plan participants. Our
contribution increases.1 By making retirement
Retirement Funds’ mix of investments changes
saving easier for their workers, plan sponsors
as each one approaches its target date, and to
can help their employees lay a solid foundation
keep expenses low, they take advantage of
for achieving financial security in retirement.
index funds, which tend to have the lowest
Inwood House is dedicated to helping teens take charge of their lives and become healthy and self-reliant adults. 9
“What I get from Mutual of America is continuity of service. Their team is on hand, always ready to answer my questions or meet with me at River City. There’s a close connection—that has value for me.” John Gonzalez President River City Produce Company San Antonio, Texas
10
John Gonzalez, Michael “Nando” Gonzalez, Paul G. Gonzalez and Gina Gonzalez-Inglett, who own and operate River City Produce Company, with Tracey Smith of Mutual of America’s Houston Regional Office (seated). 11
river city produce company san antonio, texas
Support plan sponsors
Our Company’s salaried Regional Office representatives, located in major cities across the country, focus on building long-term relationships with our customers. When clients call, our local representatives know who they are—they know their employees, their plans and their organizational goals and challenges. The depth of service we provide to plan sponsors also includes the expertise of our home office professionals in finance, investments, plan administration, technical services and actuarial consulting services, who can assist with plan-related issues and, if needed, meet on site with an organization’s staff and board of directors.
“This isn’t my area of expertise, so I depend on the Regional Office team to help me with plan design and administration and with educating my employees and getting them enrolled. They handle virtually everything for us.” John Gonzalez
Founded by the late Patricio M. Gonzalez, River City Produce remains a family-owned and operated business, distributing fresh domestic and imported fruits and vegetables to customers over a 500-mile radius.
12
At a time of tight budgets and cost cutting for
Our full-service approach eliminates the need
so many businesses, we have kept our fees
for third-party record keepers—there is no one
competitive while providing an enhanced suite
between our clients and Mutual of America.
of plan services that includes:
And unlike many of our competitors, Mutual
• the preparation of plan documents,
of America does not impose start-up fees,
amendments, restatements and summary plan
conversion fees, commissions, sales loads or
description booklets;
any surrender or withdrawal fees. 2
• on-site consultations with the leadership of plan sponsors on plan provisions and regulatory matters as well as assistance with plan installation;
• on-site group and individual meetings to
educate employees and help them get enrolled and contributing;
• assistance monitoring salary deferral limits; and • the preparation of an Annual Fund Statement
showing all financial activity under the contract.
Perhaps most importantly, our service doesn’t stop at the point of sale. Our focus on longterm client relationships translates into careful, consistent, personal attention for as long as you’re with Mutual of America. Cultivating and maintaining strong client relationships continues to differentiate Mutual of America from any other retirement plan service provider in America.
peRSonaL SeRViCe MaKeS the diFFeRenCe: when organizations
choose to leave their retirement plan service provider and make the move to mutual of america, our dedicated Regional office service teams oversee every detail of the transition process. They work closely with the current plan provider to make certain that key plan and participant information is accurately integrated into hotline plus, our plan administration website. online enrollment facilitates an efficient, user-friendly enrollment experience that supports a seamless transition to mutual of america.3
13
Left to right: Kellie Thomas, Mutual of America Regional Financial Consultant; Diego Ramon from Mutual of America’s Richmond Regional Office; and Darcy Oman, President and CEO, The Community Foundation Serving 14 Richmond & Central Virginia.
“I have employees from 26 to 60, and they all need guidance when it comes to saving for retirement. In addition to group meetings, Mutual’s representatives come monthly to meet with our employees and their spouses to discuss their individual planning needs on a one-to-one basis. I’ve also benefited from the services of a Regional Financial Consultant. At no cost to us, she helped me and my husband develop a financial plan that’s been invaluable in helping us consider ways to achieve our retirement goals.” Darcy Oman President and CEO The Community Foundation Serving Richmond & Central Virginia Richmond, Virginia
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The Community Foundation Serving Richmond & Central Virginia Richmond, Virginia
Offer comprehensive financial education
Engaging individuals in meaningful conversations about their retirement income needs is critical in motivating them to take action that will improve their chances of securing a comfortable retirement. Through on-site group meetings and one-on-one consultations, our local Participant Account Representatives help individuals understand the steps they need to take to achieve financial security for the future and make lasting changes in the way they manage their finances.
“I’m not in sales. My job is to help clients ask the right questions and show them different ways of looking at their options.” Kellie Thomas, CFP Mutual of America Regional Financial Consultant
16
Knowledgeable and skilled communicators, our
Capital Management Report and enews. “Save
representatives are able to present complex
More for Your Retirement,� our 2012 participant
financial concepts in everyday terms, helping
education campaign, continues to provide
people to appreciate the benefits of their
accessible, relevant information on retirement
employer-sponsored plan and to invest with
saving to individuals at every life stage.
more confidence. Also, Regional Financial
Interactive calculators at mutualofamerica.com
Consultants like Kellie Thomas work
help customers estimate their retirement
individually with certain clients to develop a
income and future financial needs.
comprehensive retirement readiness analysis to help them plan for the retirement they want. 4
Through our quality retirement products, competitive Interest Account, carefully
In addition to working with individuals directly,
chosen Separate Account investment funds
we offer opportunities to learn about
and the personal availability of our Regional
retirement and long-term investing through a
Office staff, individuals of every age and income
wide range of print and electronic brochures,
level have the tools they need to make well-
articles and periodicals such as our quarterly
informed decisions about their financial future.
The Community Foundation Serving Richmond & Central Virginia was founded in 1968 to provide stewardship for permanent endowments that enhance the lives of area citizens.
17
“Mutual of America is a trifecta for Children, Inc. It provides three things we’re looking for: highquality investment options, really responsive service and all at a reasonable price. When those three things come together, not only are you going to be happy, you’re going to stay.” Rick Hulefeld Executive Director Children, Inc. Covington, Kentucky
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Left to right: Rick Hulefeld, Founder and Executive Director, Children, Inc., with Cristie Sams and Michael Nordyke of Mutual of America’s Cincinnati Regional Office. 19
ChildREn, inC. CovingTon, KEnTuCKY
provide high-QualiTy invesTmenT opTions
prominent investment managers, a well-considered array of leading investment funds and comprehensive educational and administrative support make mutual of america a leading provider of investment services for individuals and retirement plan sponsors. Each of the separate account investment funds we offer is carefully selected and monitored to provide consistent, long-term growth potential appropriate for retirement saving. plan participants and individuals investing in our iRa or Fpa can choose from among equity, fixed income, money market and balanced funds as well as our target-date Retirement Funds. Taken together, these funds offer a range of investment strategies and management styles from which to choose for individuals of every age, risk tolerance level and degree of investment experience.
“as a plan administrator, one of my major responsibilities is to make sure that my employees have high-quality investment options to choose from. mutual of america offers high-quality investment funds in a broad range of investment styles. that gives me peace of mind.” Rick Hulefeld
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Children, Inc., is the largest private nonprofit provider of high-quality child care in Kentucky, offering nationally accredited child care and early childhood education programs for infants to school-age children.
The array of funds we make available for
our website to transfer account assets and change
retirement investing is very competitive when
their allocations easily and without charge; track
compared to other comparable Morningstar®
fund performance over 1-, 3-, 5- and 10-year
rated funds. We are particularly pleased that all
periods (or since inception); and check their year-
of the Mutual of America Allocation Funds and
to-date contributions and personal rate of return.
target-date Retirement Funds available under
For individuals on the go, Mutual of America
our group retirement plans received a five-star
recently launched a mobile website for use with
rating from Morningstar® for the five-year period
handheld devices to accommodate our
ending December 31, 2012.5 Their solid
customers’ desire for secure mobile access to
performance and relatively low fees have made
their personal account information.
these funds an appealing choice for individuals who want a simplified approach to investing.
our ratings
Our General Account investment strategy of The Interest Accumulation Account (IAA) of
maintaining high-quality assets with excellent
our General Account, with a competitive
liquidity, strong capital adequacy and a proper
annual yield and a guarantee of principal and
matching of assets and liabilities places Mutual
credited interest, is another attractive
of America among the strongest of all life
retirement savings alternative. Mutual of
insurance companies in the United States. The
America assumes the investment risk of the
strong ratings we again received from the major
underlying investments of the IAA. This
independent rating agencies in 2012 reflect
guarantee is subject to Mutual of America’s
the financial strength of Mutual of America’s
financial strength and claims-paying ability.
General Account and the Company’s prudent
6
General Account investment policies.7 We believe it’s important that the saving and investment options we make available can be fully and clearly communicated so that participants feel confident about contributing to the plan. To that end, in addition to educational meetings with our local representatives, we provide clear, comprehensive written and online information on each investment fund’s objectives, managers, performance and fees. Plan participants can go to
indePendent ratings7 a.m. Best (as of May 2012)
a+ (Superior)
“The ratings of Mutual of America Life Insurance Company reflect the company’s prominent market position in the small to medium-size not-forprofit annuity and pension sectors, conservative investment management approach, strong risk-adjusted capitalization, and robust asset/liability management.”
standard & Poor’s® (as of October 2012)
aa- (Very Strong)
fitch (as of October 2012)
aa- (Very Strong)
“[Mutual of America’s] competitive strengths are demonstrated by the consistently strong growth of its thrift plans (403(b), 401(k), and 401(a)), individual retirement accounts (IRAs), and annuity products... .”
“Mutual of America’s rating continues to be based on the company’s extremely strong balance sheet fundamentals.”
21
Perhaps nothing speaks more forcefully of who we are as a Company than the fact that, in 2012, virtually every Mutual of America employee participated in charitable events and voluntary giving, both individually and with coworkers.
22
Mutual of America employees at the American Cancer Society Making Strides Against Breast Cancer Walk in New York. 23
help sTrengThen CommuniTies
our Company’s depth of volunteerism and corporate giving reects our shared sense of social responsibility. leadership, service, trust: these are the values mutual of america is built on and endeavors to carry forward every day. one way we demonstrate our commitment is through the mutual of america Community partnership award. now in its 17th year, this award honors the contributions that nonprofit organizations, in partnership with public and private organizations, make to society.
through the community Partnership award, mutual of america is proud to recognize, support and help extend the reach of these vital partnerships.
The Challenged Athletes Foundation initiated Operation Rebound, winner of the Mutual of America Community Partnership Governor Hugh L. Carey National Award for 2012.
24
The Community Partnership National Award
Another way our Company supports efforts
winner and recipient of the 2012 Governor
that help pave the way for a better America is
Hugh L. Carey Award is Operation Rebound,
by continuing to support the award-winning
a partnership begun by the Challenged
Public Broadcasting System (PBS) series
Athletes Foundation. Operation Rebound
Religion and Ethics Newsweekly as well as the
uses the healing power of sports as a path to
PBS newsmagazine Need to Know. Both of these
recovery for active duty service members,
programs are dedicated to analyzing pressing
veterans and first responders who have
social issues and seeking solutions through the
suffered life-changing injuries as a result of
open exchange of ideas.
their service. The partnership provides adaptive sports equipment, sports
Perhaps nothing speaks more forcefully of who
prosthetics, training, mentoring and
we are as a Company than the fact that, in 2012,
competition expenses and has helped nearly
virtually every Mutual of America employee
1,400 injured service members to revive their
participated in charitable events and voluntary
competitive spirit and pursue goals as big as
giving, both individually and with coworkers.
competing in the Paralympics and as
They have raised money and lent a hand in
important as being able to chase their
support of organizations across the country and
children around the block.
around the world that are dedicated to helping those in need. The Company supports their
In addition to our National Award winner,
efforts through matching contributions, grants
nine other worthy organizations from across
and gifts to hundreds of charitable
the country were recognized through the
organizations.
2012 Community Partnership Award for their outstanding leadership in applying creative
Service to our customers and to the larger
solutions to critical challenges facing our
community in which we live has kept our
country. Their actions testify to the tenacity
Company strong since our founding in 1945
of the American spirit and celebrate the
and continues to guide us going forward. The
importance of community and service, and
Spirit of America, a simple and powerful idea
of living life with heartfelt purpose. Through
our Company stands by, reflects both our
the Community Partnership Award, Mutual
country’s proud heritage and our commitment
of America is proud to recognize, support
to do our utmost to help strengthen our
and help extend the reach of these vital
society and help Americans achieve a
partnerships.
financially secure future.
The U.S. Marine Corps Toys for Tots Foundation and the National Multiple Sclerosis Society are two of the many charitable organizations our employees support.
25
mutual of america board of directors
Thomas J. Moran
Chairman, President and Chief Executive Officer Mutual of America New York, New York
Senator Connie Mack
Partner Liberty Partners Group Washington, D.C. Chairman Emeritus H. Lee Moffitt Cancer Center & Research Institute Tampa, Florida
26
Clifford L. Alexander, Jr.
Kimberly Casiano
Roselyn P. Epps, M.D.
John R. Greed
Earle H. Harbison, Jr.
Robert J. McGuire, Esq.
Roger B. Porter, Ph.D.
Peter J. Powers
General Dennis J. Reimer
Elie Wiesel
President Alexander & Associates, Inc. Washington, D.C.
Counsel New York, New York
President Kimberly Casiano & Associates Inc. San Juan, Puerto Rico
IBM Professor of Business and Government Harvard University Cambridge, Massachusetts
Medical and Public Health Consultant Washington, D.C.
Chairman and Chief Executive Officer Powers Global Strategies, LLC New York, New York
Senior Executive Vice President and Chief Financial Officer Mutual of America New York, New York
U.S. Army (Retired); National Security Consultant Arlington, Virginia
Chairman Harbison Corporation St. Louis, Missouri
Andrew W. Mellon Professor in the Humanities Boston University Boston, Massachusetts Founder, The Elie Wiesel Foundation for Humanity; Nobel Laureate New York, New York
election of directors Mutual of America policyholders and contract holders are entitled to participate in the election of Directors. The election is held each year on a designated working day in April. In 2013 the election Maurine A. Haver Founder and Chief Executive Officer Haver Analytics, Inc. New York, New York
Frances R. Hesselbein President and Chief Executive Officer The Frances Hesselbein Leadership Institute New York, New York
LaSalle D. Leffall, Jr., M.D. Charles R. Drew Professor of Surgery Howard University College of Medicine Washington, D.C.
of Directors is scheduled for Thursday, April 25, 2013, between 10:00 a.m. and 4:00 p.m., at the Home Office, 320 Park Avenue, New York, NY 10022. At each election, approximately one-third of the Directors are elected for terms of three years. Each policyholder and contract holder whose policy or contract has been in force for one year prior to the date of election is entitled to one vote per person to be cast in person, by mail or by proxy. Pursuant to Section 4210 of the New York Insurance Law, groups of policyholders or contract holders have the right to nominate one or more independent tickets not less than five months prior to the date of each election. Mail ballots may be
Patrick A. Burns
Consultant to the Board of Mutual of America Bronxville, New York
obtained by writing to the Corporate Secretary at Mutual of America’s Home Office address, no later than 60 days prior to the date of election.
27
mutual of america boards of directors
Mutual of America Capital Management Corporation Amir Lear
Chairman and Chief Executive Officer Mutual of America Capital Management Corp. New York, New York
Theresa A. Bischoff Chief Executive Officer (Past) American Red Cross in Greater New York New York, New York
Noreen Culhane
Executive Vice President (Past) New York Stock Exchange New York, New York
Robert X. Chandler
Development Director (Past) Archdiocese of Boston Boston, Massachusetts
Nathaniel A. Davis Managing Director RANND Advisors Oakton, Virginia
Robert C. Golden
Executive Vice President of Corporate Operations (Past) Prudential Financial, Inc. Newark, New Jersey
28
Christopher C. Quick Vice Chairman, Global Wealth and Investment Management (Past) Bank of America New York, New York
James E. Quinn
President (Past) Tiffany & Company New York, New York
Alfred E. Smith IV
Chairman of the Board (Past) Saint Vincent Catholic Medical Centers New York, New York
John J. Stack
Chairman and Chief Executive Officer (Past) Ceska Sporitelna Prague, Czech Republic
Mutual of America investment Corporation Mutual of America institutional funds, Inc. John R. Greed
Chairman of the Board President and Chief Executive Officer Mutual of America Investment Corporation and Mutual of America Institutional Funds, Inc. New York, New York
Carolyn N. Dolan
Founding Principal and Portfolio Manager Samson Capital Advisors, Inc. New York, New York
Kevin M. Kearney
Partner Wingate, Kearney & Cullen Brooklyn, New York
LaSalle D. Leffall III President and Founder LDL Financial, LLC Washington, D.C.
John W. Sibal
President and Chief Executive Officer Eustis Commercial Mortgage Corporation New Orleans, Louisiana
Margaret M. Smyth
Vice President of Finance Con Edison New York, New York
William E. Whiston
Chief Financial Officer Archdiocese of New York New York, New York
Patrick J. Waide, Jr. President (Past) Drucker Foundation New York, New York
fin a ncia l a nd corp or ate infor m ation Statement by Management
30
Consolidated Statutory Statements of Financial Condition
31
Consolidated Statutory Statements of Operations and Surplus
32
Consolidated Statutory Statements of Cash Flows
33
Notes to Consolidated Statutory Financial Statements
Independent Auditors’ Report Officers
34 53
55
Regional Offices
57
29
STATEMENT BY MANAGEMENT
Management is responsible for the integrity of the accompanying consolidated statutory financial statements. In meeting this responsibility, management maintains systems of internal controls designed to provide reasonable assurance that assets are safeguarded and that transactions are executed in accordance with appropriate authorization and are properly recorded. These systems include an organizational structure that appropriately provides for delegation of authority and division of responsibility, the communication and enforcement of accounting and business policies and procedures and the utilization of an internal audit program that requires responsive action to audit findings. The accompanying consolidated financial statements have been prepared by management in conformity with statutory accounting principles prescribed or permitted by the New York State Department of Financial Services. Such practices differ from U.S. generally accepted accounting principles (GAAP). Since the New York State Department of Financial Services recognizes only statutory accounting practices for determining and reporting financial condition and results of operations of insurance companies, and no consideration is given to GAAP financial information, the accompanying consolidated statutory financial statements present the Company’s consolidated financial position and results of operations in conformity with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services. The significant variances between such practices and GAAP are described in Note 9 to the consolidated statutory financial statements, which is included on pages 51-52. The accompanying consolidated statutory financial statements for the years ending December 31, 2012 and 2011, have been audited by KPMG LLP, and their opinion, which states that the accompanying consolidated statutory financial statements are fairly presented in conformity with accounting practices prescribed or permitted by the New York State Department of Financial Services, is included on pages 53-54. Their audits were performed in accordance with the standards of the Public Company Accounting Oversight Board (United States). The Board of Directors has appointed an Audit Committee composed solely of directors who are not officers or employees. The committee meets regularly with management, the Executive Vice President and Internal Auditor and the independent registered public accounting firm to review audit scope and results, the adequacy of internal controls and accounting and financial reporting matters. The Audit Committee also reviews the services performed by the independent registered public accounting firm and related fee arrangements and recommends their appointment to the Board of Directors. The independent public accounting firm and the Executive Vice President and Internal Auditor have direct access to the Committee.
30
CONSOLIDATED STATUTORY STATEMENTS OF FINANCIAL CONDITION December 31, 2012 and 2011
2012
2011
ASSETS
General Account assets Bonds and notes Common stocks Cash and short-term investments Guaranteed funds transferable Mortgage loans Real estate Policy loans Investment income accrued Deferred federal income taxes Other assets
$ 7,311,434,486 23,973,659 17,592,947 24,234,965 708,307 245,450,217 100,957,806 86,775,639 74,991,293 18,065,064
$ 6,997,640,298 44,784,304 7,127,969 30,338,989 1,262,625 253,146,871 101,251,111 86,554,296 64,330,201 18,175,759
Total General Account assets
7,904,184,383
7,604,612,423
Separate Account assets
6,743,948,569
5,899,846,871
$14,648,132,952
$13,504,459,294
$ 6,612,413,220 7,662,271 137,639,500 184,983,047
$ 6,434,183,841 11,705,941 121,021,902 142,160,266
TOTAL ASSETS LIABILITIES AND SURPLUS
General Account liabilities Insurance and annuity reserves Other contract holders liabilities and reserves Interest maintenance reserve Other liabilities Total General Account liabilities before asset valuation reserve
6,942,698,038
6,709,071,950
Separate Account reserves and other liabilities
6,743,948,569
5,899,846,871
13,686,646,607
12,608,918,821
53,607,214
49,398,157
Total liabilities before asset valuation reserve Asset valuation reserve Total liabilities
13,740,253,821
12,658,316,978
SURPLUS
Assigned surplus Unassigned surplus
1,150,000 906,729,131
1,150,000 844,992,316
Total surplus
907,879,131
846,142,316
TOTAL LIABILITIES AND SURPLUS
$14,648,132,952
$13,504,459,294
See accompanying notes to consolidated statutory financial statements. 31
CONSOLIDATED STATUTORY STATEMENTS OF OPERATIONS AND SURPLUS For The Years Ended December 31, 2012 and 2011
2012
2011
INCOME
Premium and annuity considerations Life and disability insurance premiums Total considerations and premiums Separate Account investment and administrative fees Net investment income Other, net Total income
$ 1,672,742,062 12,280,451
$ 1,538,892,743 13,886,053
1,685,022,513
1,552,778,796
68,636,221 374,468,496 6,009,044
65,094,291 377,268,689 6,246,114
2,134,136,274
2,001,387,890
349,939,259 1,490,932,839 10,838,552 237,725,940
(89,458,988) 1,800,587,572 10,712,145 233,615,612
2,089,436,590
1,955,456,341
DEDUCTIONS
Change in insurance annuity reserves Annuity and surrender benefits Death and disability benefits Operating expenses
Total deductions Net gain before dividends
44,699,684
Dividends to contract holders and policyholders
(68,075)
45,931,549 (63,478)
Net gain from operations
44,631,609
45,868,071
Federal income tax (expense)
(2,940,396)
(3,588,525)
Net realized capital gains Net income
7,130,832
4,180,014
48,822,045
46,459,560
SURPLUS TRANSACTIONS
Change in: Asset valuation reserve Unrealized capital (losses), net Nonadmitted assets and other, net Minimum pension liability Net deferred income tax asset Adjustment for nonqualified deferred compensation plan Incremental increase in net deferred income tax asset Net change in surplus
(4,209,057) (8,274,928) 11,578,301 12,860,000 12,219,285 (11,258,831) —
(11,103,800) (6,332,697) 14,903,373 (38,169,000) 2,348,842 — 3,388,312
61,736,815
11,494,590
SURPLUS
Beginning of year End of year
846,142,316
834,647,726
$ 907,879,131
$ 846,142,316
See accompanying notes to consolidated statutory financial statements. 32
CONSOLIDATED STATUTORY STATEMENTS OF CASH FLOWS For The Years Ended December 31, 2012 and 2011
2012
2011
CASH FLOWS FROM OPERATIONS
Premium and other income collected Net investment income Separate Account investment and administrative fees Benefit payments Net transfers (to) from separate accounts Investment and operating expenses paid Other, net Dividends paid to policyholders
$ 1,685,247,779 371,333,004 68,636,221 (1,506,650,205) (108,744,366) (204,882,337) 9,443,938 (72,702)
Net cash from operations
$ 1,552,787,943 370,030,699 65,094,291 (1,814,145,531) 462,476,673 (192,926,103) 5,100,964 (152,837)
314,311,332
448,266,099
CASH FLOWS FROM INVESTMENTS
Proceeds from investments sold, matured or repaid: Bonds Common stock Mortgage loans Real estate Other invested assets Other
2,445,076,404 34,431,919 554,318 8,664,284 6,104,024 151,891
1,887,900,195 5,974,389 510,606 8,643,974 5,631,915 2,033,693
Total
2,494,982,840
1,910,694,772
Costs of investment acquired: Bonds Common stock Real estate Other
(2,743,569,401) (4,948,244) (967,629) —
(2,314,295,326) (6,468,153) (6,719,237) —
Total
(2,749,485,274)
(2,327,482,716)
Net change in policy loans
297,624
Net cash used in investment activity
(4,669,206)
(254,204,810)
(421,457,150)
Net withdrawals on deposit-type contracts Other cash applied
(53,241,376) 3,599,832
(41,144,669) 3,359,234
Net cash applied from financing and others sources
(49,641,544)
(37,785,435)
CASH FLOW FROM FINANCING AND OTHER SOURCES
Net change in cash, cash equivalents and short-term investments
10,464,978 (10,976,486)
Cash, cash equivalents and short-term investments: Beginning of year End of year
7,127,969 $
17,592,947
18,104,455 $
7,127,969
See accompanying notes to consolidated statutory financial statements. 33
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS December 31, 2012 and 2011
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying financial statements include the consolidated accounts of Mutual of America Life Insurance Company (Mutual of America) and its wholly owned subsidiaries (collectively referred to as the Company), as permitted by the New York State Department of Financial Services (formerly known as the State of New York Insurance Department). Significant intercompany balances and transactions have been eliminated in consolidation. Nature of Operations Mutual of America provides retirement and employee benefit plans in the small to medium-size company market, principally to employees in the not-for-profit social health and welfare field. In recent years, the Company has expanded to include for-profit organizations in the small to medium-size company market. The insurance company in the group is licensed in all 50 states and the District of Columbia. Sales operations are conducted primarily through a network of regional offices staffed by salaried consultants. Basis of Presentation The accompanying financial statements are presented in conformity with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services (New York Department). Such practices differ from U.S. generally accepted accounting principles (GAAP). The significant variances between such practices and GAAP are described in Note 9. The ability of the Company to fulfill its obligations to contract holders and policyholders is of primary concern to insurance regulatory authorities. The National Association of Insurance Commissioners (NAIC) has codified statutory accounting principles (Codification). The New York Department issued Regulation No. 172 (Regulation No. 172), which adopted Codification, with certain significant modifications, as the prescribed basis of accounting for its domestic insurers. Periodically, the New York Department amends Regulation No. 172 for revisions in the prescribed basis of accounting. All changes required by New York Regulation No. 172, as amended through December 31, 2012, are reflected in the accompanying consolidated statutory financial statements. SSAP No. 102 Accounting for Pensions, a Replacement for SSAP No. 89 (SSAP No. 102) became effective on January 1, 2013. SSAP No. 102 requires that the difference at January 1, 2013 between a Defined Benefit Plan’s projected benefit obligation and the fair value of its plan assets be recorded as a liability, either through an immediate charge to surplus or as a series of deferred surplus charges, as determined under the SSAP. The Company has elected to recognize its transition obligation of approximately $62.9 million in annual increments that are at least equal to the annual amortization of prior unrecognized losses as calculated under SSAP No. 89. The annual January 1st charge to surplus will be approximately $11.6 million until the $62.9 million transition obligation is completely recognized. SSAP No. 92 Accounting for Postretirement Benefits Other than Pensions, a replacement for SSAP No. 14 (SSAP No. 92), also became effective on January 1, 2013. This statement will require that participants not yet eligible to retire be included in the accumulated postretirement benefit obligations. The Company believes the adoption of this SSAP will not have a material impact on surplus.
34
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of income and deductions during the reporting period. Actual results could differ from these estimates. Asset Valuations Bonds, Notes and Short-Term Investments — Investment valuations are prescribed by the NAIC. Bonds, which include asset-backed and mortgage-backed investments qualifying for amortization, and notes, are stated at amortized cost. Amortization of bond premium or discount is calculated using the constant yield interest method taking into consideration specified interest and principal provisions over the life of the bond. Short-term investments are stated at cost, which approximates fair value, and consist of highly liquid investments purchased with maturities of one year or less. Bond, note and short-term investment transactions are recorded on a trade date basis. The fair value of bonds and notes is based upon quoted market prices provided by an independent pricing organization. If quoted market prices are unavailable or an inactive market for the security currently exists, fair value is estimated using internal valuation models and techniques or based upon quoted market prices for comparable investments. At December 31, 2012, there were six securities with a fair value of $24.2 million for which no quoted market prices were available. As such, the Company used internal valuation models and techniques to determine the fair value of these securities. The Company recorded an unrealized loss of $2.0 million to adjust the carrying value of these securities, which were required to be reported at the lower of amortized cost or fair value, to their current fair value at December 31, 2012. At December 31, 2011, there were five securities with a fair value of $26.9 million that were valued using this methodology. Bonds, where the NAIC rating has fallen to class six and the fair value is below amortized cost, are carried at the lower of amortized cost or fair value. On December 31, 2011, the rating of one asset-backed security with a book value of $12.0 million was lowered to an NAIC class six, which requires that the security be reported at the lower of amortized cost or fair value. While the results of the valuation testing determined that this security did not have an other-than-temporary credit impairment, a $7.7 million interest rate related loss was recorded to adjust this security to its estimated fair value at December 31, 2011, and was accounted for as a realized capital loss charged to the Interest Maintenance Reserve (IMR). Given the current inactivity for this security, its fair value was estimated using internal valuation models and techniques for both 2012 and 2011. Losses that are considered to be other-than-temporary are recognized in net income when incurred. All bonds are subjected to the Company’s quarterly review process for identifying other-than-temporary impairments. This impairment identification process utilizes a screening procedure that includes all bonds in default or not in good standing, as well as bonds with a fair value that is less than 80% of their cost for a continuous six-month period. The Company writes down bonds that it deems to have an other-than-temporary impairment after considering a wide range of factors, including, but not limited to, the extent to which cost exceeds fair value, the duration of that market decline, an analysis of the discounted estimated future cash flows for asset-backed and mortgage-backed securities, an analysis of the financial health and specific prospects for the issuer, the likelihood that the Company will be able to collect all amounts due according to the contractual terms of the debt security in effect at the date of acquisition, consideration as to whether the decline in value is due to general changes in interest rates and credit spreads and the Company’s intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. If an impairment is determined to be other-than-temporary, a realized capital loss equal to the entire difference between the amortized cost of the bond and its fair value is recorded and a new cost
35
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS December 31, 2012 and 2011
basis for the bond is established. Credit-related other-than-temporary impairment losses are recorded as realized capital losses included in net income (and through the asset valuation reserve), whereas interest-related other-thantemporary impairment losses are recorded in the IMR. Common and Preferred Stocks — At December 31, 2012 and 2011, common stocks included $17.0 million and $34.8 million, respectively, invested in a sponsored series of mutual funds for institutional investors. The December 31, 2012 and 2011, amounts also include $6.9 million and $3.3 million, respectively, invested in actively managed LargeCap and Small-Cap Value equity portfolios in 2012 and a Mid-Cap Growth equity portfolio in 2011. During 2012, the Company liquidated its entire investment in the All America Institutional Fund and recognized an $8.3 million realized capital gain. Common stocks in good standing are stated at fair value. Fair value is determined by reference to valuations quoted by an independent pricing organization. Unrealized gains and losses are recorded directly to unassigned surplus. Preferred stock is carried at cost. Losses that are considered to be other-than-temporary are recognized in net income when incurred. All equity investments are subjected to the Company’s quarterly review process for identifying other-than-temporary impairments. This impairment identification process utilizes a screening procedure that includes all common stock issuers not in good standing, as well as common stocks where the fair value is less than 80% of their cost for a continuous six-month period. The Company writes down common stocks that it deems to have an other-thantemporary impairment after considering a wide range of factors, including, but not limited to, the extent to which cost exceeds fair value, the duration of that market decline, an analysis of the financial health and specific prospects for the issuer and the Company’s intent and ability to retain its investment for a period of time sufficient to allow for any anticipated recovery in fair value in the short-term. The Company also considers other qualitative and quantitative factors in its evaluation of other-than-temporary impairments. Guaranteed Funds Transferable — Guaranteed funds transferable consists of funds held with a former reinsurer and is stated at the total principal amount of future guaranteed transfers to Mutual of America, net of a $1.5 million unrealized loss that was recorded as a direct reduction to unassigned surplus. No additional losses were recorded on this investment during 2012 and 2011. Mortgage Loans — Mortgage loans are carried at amortized indebtedness. Impairments of individual loans that are considered other-than-temporary are recognized in net income when incurred. There were no impairment losses incurred during 2012 and 2011. Real Estate — Real estate, which is classified as Company-occupied property, is carried at cost, including capital improvements, net of accumulated depreciation of $157.5 million and $148.8 million at December 31, 2012 and 2011, respectively, and is depreciated on a straight-line basis over 39 years. Tenant improvements on real estate investments are depreciated over the shorter of the lease term or the estimated life of the improvement. Policy Loans — Policy loans are stated at the unpaid principal balance of the loan. During 2012, the Company recognized a $.9 million realized capital loss on certain loans where the loan value exceeded the associated collateral on the loans and collection efforts on the unpaid balance of the policy loans were unsuccessful. Also at December 31, 2012, the Company recorded a $1.1 million unrealized loss on certain other policy loans where the current total outstanding principal and interest amounts exceed the current value of the related participant account balances available as collateral to satisfy these loans. 36
Other Assets — Certain other assets, such as net deferred income tax assets not expected to be realized within three years, furniture and fixtures and prepaid expenses, are considered “nonadmitted assets” and are excluded from the consolidated statutory statements of financial condition. Insurance and Annuity Reserves Reserves for annuity contracts are computed on the net single premium method and represent the estimated present value of future retirement benefits. These reserves, which were $.9 billion at both December 31, 2012 and 2011, are based on mortality and interest rate assumptions (ranging predominately from 5.00% to 6.50% at both December 31, 2012 and 2011), which meet or exceed statutory requirements and are not subject to discretionary withdrawal. Reserves for contractual funds not yet used for the purchase of annuities are accumulated at various credited interest rates that, during 2012 and 2011, averaged 2.29% and 2.50%, respectively, and are deemed sufficient to provide for contractual surrender values for these funds. These reserves, which were $5.6 billion and $5.4 billion at December 31, 2012 and 2011, respectively, are subject to discretionary withdrawal at book value. Reserves for guaranteed investment contracts, which were $33.0 million and $39.2 million at December 31, 2012 and 2011, respectively, are accumulated at various guaranteed interest rates, which during 2012 and 2011 averaged 2.33% and 2.21%, respectively, and meet statutory requirements. Reserves for life and disability insurance are based on mortality, morbidity and interest rate assumptions, which meet statutory requirements. Other Liabilities Effective January 1, 2012, the Company recorded an $11.2 million charge to surplus for an adjustment related to the Company’s nonqualified deferred compensation plan to better reflect the nature of the plan as a deferred compensation arrangement accounted for in accordance with SSAP No. 14, Post-Retirement Benefits Other Than Pensions. Previously, the plan was accounted for in accordance with SSAP No. 89, Accounting for Pensions. The $11.2 million charge to surplus included a $2.2 million reduction in the prepaid pension asset associated with this plan, which was written off in connection with this adjustment. As such, the net impact was a $9.0 million charge to surplus. In addition, this adjustment resulted in insurance and annuity reserves of $30.5 million being reclassified to the other liabilities caption in the Statement of Financial Condition effective January 1, 2012. Interest Maintenance and Asset Valuation Reserves Realized gains and losses, including certain other-than-temporary impairment losses, net of applicable taxes, arising from changes in interest rates are accumulated in the IMR and are amortized into net investment income over the estimated remaining life of the investment sold. All other realized gains and losses are reported in the consolidated statements of operations. An Asset Valuation Reserve (AVR), applying to the specific risk characteristics of all invested asset categories excluding cash, policy loans and investment income accrued, has been established based on a statutory formula. Realized and unrealized gains and losses, including other-than-temporary impairment losses arising from changes in the creditworthiness of the issuer, are included in the appropriate subcomponent of the AVR. Changes in the AVR are recorded directly to unassigned surplus.
37
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS December 31, 2012 and 2011
Separate Account Operations Variable annuity considerations and certain variable life insurance premiums may be allocated at participants’ discretion among investment funds in Separate Accounts. Separate Account funds invest in mutual funds, including funds managed by Mutual of America Capital Management Corporation, a wholly owned subsidiary (the Adviser), and other funds managed by outside investment advisors. All net realized and unrealized capital gains in the Separate Accounts, which reflect investment performance of the mutual funds in which they invest, accrue directly to participants (net of administrative and other Separate Account charges) and are not reflected in the Company’s Consolidated Statutory Statements of Operations and Surplus. Certain administrative and other charges are assessed as a percentage of Separate Account assets and vary based upon the average size of the participant’s equity in the Separate Accounts and the level of administrative services provided. In 2012 and 2011, such charges were equal to approximately 1.07% and 1.04%, respectively, of total average Separate Account assets. Separate Account charges and investment advisory fees paid to the Adviser are included in the Consolidated Statutory Statement of Operations and Surplus. Investments held in the Separate Accounts are stated at fair value and are not available to satisfy liabilities of the General Account. Participants’ corresponding equity in the Separate Accounts is reported as liabilities in the accompanying statements. Premiums and benefits related to the Separate Accounts are combined with the General Account in the accompanying statements. Net operating gains and losses are offset by changes to reserve liabilities in the respective Separate Accounts. These reserves, which were approximately $6.7 billion and $5.9 billion at December 31, 2012 and 2011, respectively, are subject to discretionary withdrawal at fair value. Premiums and Annuity Considerations All annuity considerations derived from voluntary retirement savings-type plans and defined benefit plans, which represent the vast majority of the Company’s annual premiums, are recognized as income when received. Insurance premiums and annuity considerations derived solely from defined contribution plans are recognized as income when due. Group life and disability insurance premiums are recognized as income over the contract period. Investment Income and Expenses General Account investment income is reported as earned and is presented net of related investment expenses. Operating expenses, including acquisition costs for new business, are charged to operations as incurred. Dividends Dividends are based on formulas and scales approved by the Board of Directors and are accrued currently for payment subsequent to plan anniversary dates. Certain 2011 amounts included in the accompanying consolidated statutory financial statements have been reclassified to conform to the 2012 presentation.
2. INVESTMENTS Valuation The statement and fair values of investments in fixed maturity securities (bonds and notes) at December 31, 2012 and 2011, are shown on the next page. Excluding U.S. government and government agency investments, the Company is not exposed to any significant concentration of credit risk.
38
Statement Gross Unrealized December 31, 2012 (in millions)
Value Gains Losses
Fair Value
Fixed maturities: Mortgage- and asset-backed securities: Residential mortgage-backed securities $2,099.9 $125.0 $ .5 $2,224.4 Commercial mortgage-backed securities — — — — Other asset-backed securities 21.2 .1 .1 21.2 Total $2,121.1 $125.1 $ .6 $2,245.6 U.S. Treasury securities and obligations of U.S. government corporations and agencies 1,014.7 50.0 1.5 1,063.2 Obligations of states and political subdivisions 24.6 1.6 — 26.2 Debt securities issued by foreign governments 25.8 3.1 — 28.9 Corporate securities 4,135.3 362.0 9.6 4,487.7 Total $7,321.5 $541.8 $11.7 $7,851.6 Statement Gross Unrealized December 31, 2011 (in millions)
Value Gains Losses
Fixed maturities: Mortgage- and asset-backed securities: Residential mortgage-backed securities $2,337.5 $143.9 Commercial mortgage-backed securities — — Other asset-backed securities 23.9 .3 Total $2,361.4 $144.2
Fair Value
$ .3 $2,481.1 — — .1 24.1 $ .4 $2,505.2
U.S. Treasury securities and obligations of U.S. 910.8 66.5 — 977.3 Obligations of states and political subdivisions 23.0 3.5 — 26.5 Debt securities issued by foreign governments 34.6 4.7 — 39.3 Corporate securities 3,670.8 235.0 15.0 3,890.8 Total $7,000.6 $453.9 $15.4 $7,439.1
The Company does not have any exposure to subprime mortgage loans, either through direct investment in such loans or through investments in residential mortgage-backed securities, collateralized debt obligations or other similar investment vehicles. Approximately 96.8% of the $2.9 billion invested in mortgage-backed securities were issued by Fannie Mae (FNMA), Freddie Mac (FHLMC) or Ginnie Mae (GNMA) and, as such, are 100% guaranteed by the U.S. government. The Company does have investments in publicly traded bonds of financial institutions. These financial institutions may have investments with subprime exposure. At December 31, 2012, the statement value and fair value of the Company’s bond investments in financial institutions totaled $857.4 million and $955.2 million, respectively. At December 31, 2011, the statement value and fair value of the Company’s bond investments in financial institutions totaled $891.8 and $927.6 million, respectively. Short-term fixed maturity securities with a statement value and fair value of $10.1 million and $3.0 million at December 31, 2012 and 2011, respectively, are included in the above tables. At both December 31, 2012 and 2011, the Company had $3.3 million (par value $3.2 million for both years), respectively, of its long-term fixed maturity securities on deposit with various state regulatory agencies.
39
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS December 31, 2012 and 2011
Fair Value The Company values its financial instruments at fair value. Fair value is an estimate of the price the Company would receive upon selling a security in an orderly arms-length transaction. Investments are categorized based on a threelevel valuation hierarchy for measurement and disclosure of fair value. The valuation hierarchy is based upon the transparency of inputs used to measure fair value. The three levels are as follows: Level 1 — quoted prices in active markets for identical securities. Level 2 — quoted prices for identical or similar assets in markets that are not active or other significant observable inputs (including yield, quality, coupon rate, maturity, issue type, quoted prices for similar securities, prepayment speeds, trading characteristics, etc.). Level 3 — significant unobservable inputs (including the assumptions in determining the fair value of investments). The Company has determined the fair value inputs used to measure all of its assets that are considered financial instruments, which include fixed maturity securities, common stocks, cash and short-term investments, mortgage loans, policy loans, other invested assets and Separate Account funds whose net asset values are calculated on a daily basis. Cash, short-term investments, common stocks, investments in publicly traded mutual funds that are registered with the Securities and Exchange Commission and Separate Account assets were determined to be Level 1. The vast majority of the Company’s fixed maturity securities (bonds and notes), and all of its policy loans, and other invested assets were determined to be Level 2. Finally, certain fixed maturity securities, the guaranteed funds transferrable and mortgage loans representing less than 1% of the total, for which quoted market prices were unavailable or an inactive market for the security currently exists, were determined to be Level 3. The inputs used for valuing these securities are not necessarily an indication of the risk associated with investing in those securities. The following tables provide fair value information at December 31, 2012 and 2011, about the Company’s assets that are considered financial instruments: December 31, 2012 Financial Instrument (in millions) Level 1 Level 2 Level 3 Total
Bonds and notes $ — $7,817.4 $24.2 $ 7,841.6 Common stocks 24.0 — — 24.0 Cash and short-term investments 17.6 — — 17.6 Guaranteed funds transferrable — — 26.6 26.6 Mortgage loans — — .7 .7 Policy loans — 101.0 — 101.0 Separate Accounts assets 6,743.9 — — 6,743.9 Total $6,785.5 $7,918.4 $51.5 $14,755.4
40
December 31, 2011 Financial Instrument (in millions) Level 1 Level 2 Level 3 Total
Bonds and notes $ — $7,409.3 $26.9 $ 7,436.2 Common stocks 42.3 2.5 — 44.8 Cash and short-term investments 7.1 — — 7.1 Guaranteed funds transferrable — — 30.3 30.3 Mortgage loans — — 1.3 1.3 Policy loans — 101.3 — 101.3 Separate Accounts assets 5,899.9 — — 5,899.9 Total $5,949.3 $7,513.1 $58.5 $13,520.9
The fair value of Level 3 securities declined from $58.5 million at December 31, 2011, to $51.5 million at December 31, 2012, primarily as a result of the change in fair market value of Level 3 securities and subsequent paydowns. The fair value of the remaining securities classified as Level 3 decreased by $2.7 million in 2012 as a result of the redetermination of the fair value and pay downs of these securities during the year. The guaranteed funds transferrable and the mortgage loan asset balances declined due to the receipt of scheduled principal payments during the year. There were no additional securities added to the Level 3 classification during 2012. In determining the fair value of Level 3 bonds and notes, the Company utilized expected cash flows provided by an independent valuation service together with discount rate and default factor assumptions commensurate with the current credit rating of such securities and consistent with those that would be used in pricing similar types of securities based upon market conditions that existed at December 31, 2012 and 2011. Unrealized Gains and Losses At December 31, 2012 and 2011, net unrealized (depreciation) appreciation reflected in surplus consisted of the following: December 31 (in millions)
2012
2011 Change
Equity securities (common and preferred stock) $ 2.4 $ 7.6 $(5.2) Bonds and notes (18.8) (16.8) (2.0) Guaranteed funds transferable (1.5) (1.5) — Other assets (1.1) — (1.1) Net unrealized (depreciation) appreciation $(19.0) $(10.7) $(8.3)
Net unrealized depreciation related to the Company’s bonds, equity securities and other assets increased by $8.3 million during the year as shown above. The net unrealized appreciation of $2.4 million related to equity securities at December 31, 2012, consists of $2.6 million of gross unrealized gains and $.2 million of gross unrealized losses, of which none of the unrealized losses are less than 12 months old. The net unrealized appreciation of $7.6 million related to equity securities at December 31, 2011, consisted of $8.0 million of gross unrealized gains and $.4 million of gross unrealized losses, of which none of the unrealized losses were greater than 12 months old. Previously, Regulation No. 172 was amended to adopt an accounting change set forth in Statement of Statutory Accounting Principles (SSAP) No. 100, Fair Value Disclosures, under which the criteria used to evaluate the fair value of investment securities, which were previously determined to be other than temporarily impaired, was changed. At the time of adoption, the Company recorded an $11.7 million unrealized loss to adjust the fair value of certain securities to an amount that more realistically reflected market conditions at that time. These bonds
41
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS December 31, 2012 and 2011
had an adjusted book value of $27.1 million prior to the recognition of this unrealized loss. During 2012 and 2011, additional unrealized losses of $2.0 million and $5.1 million, respectively, were recorded to adjust these securities to their estimated fair value. The following is an analysis of the fair values and gross unrealized losses as of December 31, 2012 and 2011, aggregated by fixed maturity category and length of time that the securities were in a continuous unrealized loss position. As shown in the table below, total gross unrealized losses as of December 31, 2012 and 2011, were $11.6 million and $15.4 million, respectively, and the majority of such losses related to corporate and U.S. Treasury securities. These unrealized losses arise primarily from general changes in interest rates and credit spreads, which are still wider than historical norms, despite having narrowed somewhat during 2012 and are not due to fundamental credit problems that exist with the specific issuers. The tables that follow exclude $7.3 billion and $6.8 billion at December 31, 2012 and 2011, respectively, of fair value of fixed maturity securities in an unrealized gain position. Fair Unrealized Number Fair Unrealized Number Value Losses of Issues Value Losses of Issues December 31, 2012 (in millions) Twelve Months or Less Twelve Months or Greater
Fixed maturities: Mortgage- and asset-backed securities: Residential mortgage-backed securities $107.7 $ .5 Commercial mortgage-backed securities — — Other asset-backed securities 8.0 — Total $115.7 $ .5
32 $ 1.6 $— — — — 1 6.2 .1 33 $7.8 $.1
5 — 3 8
U.S. Treasury securities and obligations of U.S. government corporations and agencies 203.9 1.5 Obligations of states and political subdivisions — — Debt securities issued by foreign governments — — Corporate securities 256.1 9.0 Total $575.7 $11.0
52 — — — — — — — — 18 41.9 .5 103 $49.7 $.6
— — — 4 12
Fair Unrealized Number Fair Unrealized Number Value Losses of Issues Value Losses of Issues December 31, 2011 (in millions) Twelve Months or Less Twelve Months or Greater
Fixed maturities: Mortgage- and asset-backed securities: Residential mortgage-backed securities $ 28.2 $ .2 Commercial mortgage-backed securities — — Other asset-backed securities 1.1 — Total $ 29.3 $ .2
8 $ 9.1 $ .1 — — — 1 6.4 .1 9 $ 15.5 $ .2
5 — 2 7
U.S. Treasury securities and obligations of U.S. government corporations and agencies 8.5 — Obligations of states and political subdivisions — — Debt securities issued by foreign governments — — Corporate securities 264.5 7.1 Total $302.3 $7.3
2 — — — — — — — — 29 277.8 7.9 40 $293.3 $8.1
— — — 14 21
42
Realized Capital Gains and Losses Net realized capital gains (losses) reflected in the statements of operations for the years ended December 31, 2012 and 2011, were as follows: December 31 (in millions)
Bonds and notes Equity securities (common and preferred stock) Other assets Net realized capital gains
2012
$(1.8) 9.8 (.9) $ 7.1
2011
$3.3 .9 — $4.2
At December 31, 2012 and 2011, the book value and fair value of the Company’s mortgage-backed and asset-backed securities portfolios totaled $2.9 billion and $2.8 billion, and $3.0 billion and $3.0 billion, respectively, of which approximately 95% in both years are U.S. government agency guaranteed instruments. Investments in loan-backed and asset-backed securities are carried at amortized cost, except for those securities rated as class 6 by the NAIC, which are carried at lower of amortized cost or fair value. Sales of investments in fixed maturity securities resulted in $43.0 million and $30.8 million of net interest rate related gains being accumulated in the IMR in 2012 and 2011, respectively, as follows: December 31 (in millions)
Fixed maturity securities Proceeds Gross realized gains Gross realized losses
2012
$2,582.4 43.8 (.8)
2011
$1,971.4 39.7 (8.9)
During 2012 and 2011, $26.4 million and $19.3 million, respectively, of the IMR was amortized and included in net investment income. Sales of investments in equity securities resulted in $9.8 million and $.9 million of net capital gains in 2012 and 2011, respectively being recognized in net income as follows: December 31 (in millions)
Equity securities Proceeds Gross realized gains Gross realized losses
2012
$31.4 9.9 (.1)
2011
$4.9 1.1 (.2)
Maturities The statement and fair values of investments in fixed maturity securities by contractual maturity (except for mortgage-backed securities, which are stated at expected maturity) at December 31, 2012, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.
43
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS December 31, 2012 and 2011
Statement December 31, 2012 (in millions) Value
Due in one year or less Due after one year through five years Due after five years through 10 years Due after 10 years Total
$ 431.2 1,434.9 2,490.0 2,965.4 $7,321.5
Fair Value
$ 439.0 1,581.2 2,695.4 3,136.0 $7,851.6
3. GUARANTEED FUNDS TRANSFERABLE In 1980, Mutual of America terminated a reinsurance arrangement and assumed direct ownership of funds held by John Hancock Mutual Life Insurance Company (Hancock), the former reinsurer, and direct liability for the contractual obligations to policyholders. The liability to such policyholders is included as insurance and annuity reserves in the consolidated statutory statements of financial condition. The principal amount of the funds held by the former reinsurer is guaranteed to earn at least 3.125% per year. The guaranteed funds are transferable to Mutual of America over time through 2030 and are stated at the total principal amount of future guaranteed transfers to Mutual of America of $24.2 million and $30.3 million at December 31, 2012 and 2011, respectively. The actual interest and other allocated investment earnings related to this contract amounted to $1.0 million and $1.5 million in 2012 and 2011, respectively, and are included in net investment income. 4. REAL ESTATE Real estate consists primarily of an office building that Mutual of America purchased for its corporate headquarters. The Company occupies approximately one-third of this office building as its corporate headquarters and leases the remaining space. Depreciation expense was $8.3 million and $8.6 million in 2012 and 2011, respectively.
5. PENSION PLAN AND POSTRETIREMENT BENEFITS Pension Benefit and Other Benefit Plans The Company has a qualified, noncontributory defined benefit pension plan covering virtually all employees. Benefits are generally based on years of service and final average earnings. The Company’s funding policy is to contribute annually, at a minimum, the amount necessary to satisfy the funding requirements under the Employee Retirement Income Security Act of 1974 (ERISA). The Company also maintains a nonqualified deferred compensation plan that provides benefits to employees whose total compensation exceeds the maximum allowable compensation limits for qualified retirement plans under ERISA. As discussed in Note 1, effective January 1, 2012, the Company adjusted its accounting for its nonqualified deferred compensation plan to better reflect the nature of the plan as a deferred compensation arrangement accounted for in accordance with SSAP No. 14 Postretirement Benefits Other than Pensions. As such, certain 2011 amounts in the tables that follow below, as they pertain to the nonqualified deferred compensation arrangement, have been reclassified from Pension Benefits to Other Benefits to conform with the 2012 presentation.
44
The Company has two defined benefit postretirement plans covering substantially all salaried employees. Postretirement benefit plan expense required to be recorded under these plans was $6.0 million and $4.7 million in 2012 and 2011, respectively. Employees may become eligible for such benefits upon attainment of retirement age while in the employ of the Company and upon satisfaction of service requirements. One plan provides medical and dental benefits and the second plan provides life insurance benefits. The postretirement plans are contributory for those individuals who retire with less than 25 years of eligible service, with retiree contributions adjusted annually, and contain other cost-sharing features, such as deductibles and coinsurance. All benefit plans are underwritten by Mutual of America. The components of net periodic benefit costs as calculated in the January 1, 2012 and 2011, plan valuations are as follows: December 31 (in millions)
Pension Benefits Other Benefits 2012
2011
2012
2011
Service cost $ 11.8 $ 10.9 $ 5.6 $ 4.5 Interest cost on Projected Benefit Obligation (PBO) 12.0 12.1 4.4 4.8 Expected return on plan assets (16.3) (16.8) — — Prior services costs .7 .7 (.1) .1 Amortization of unrecognized net loss (gain) 10.5 10.6 .7 .6 Net benefit expense $ 18.7 $ 17.5 $10.6 $10.0
The changes in the PBO and plan assets are as follows: December 31 (in millions)
Pension Benefits Other Benefits 2012
2011
2012
2011
Change in PBO PBO, beginning of year $260.6 $236.3 $100.4 $ 93.2 Service cost 11.8 10.9 5.6 4.5 Interest cost 12.0 12.1 4.4 4.8 Plan amendment — — (3.1) — Change in assumptions 5.2 11.0 5.9 3.7 Actuarial loss (gain) 2.2 4.7 9.5 10.3 Benefits and expenses paid (12.2) (14.4) (2.9) (16.1) PBO, end of year $279.6 $260.6 $119.8 $100.4
December 31 (in millions)
Pension Benefits Other Benefits 2012
2011
2012
2011
Change in Plan Assets Plan assets, beginning of year $168.2 $173.1 $ — $ — Employer contributions 10.2 10.0 — — Return on plan assets 22.7 (.5) — — Benefits and expenses paid (12.2) (14.4) — — Plan assets, end of year 188.9 168.2 — — Plan assets (lower than) PBO $ (90.7) $ (92.4) $(119.8) $(100.4)
45
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS December 31, 2012 and 2011
At December 31, 2012, and December 31, 2011, all of the pension plan assets are invested in several of the investment funds offered by the Company’s Separate Accounts and in the Company’s General Account, and consisted of approximately 80% in equity investments and 20% in fixed-income investments. A distribution of plan assets by investment objective as of December 31, 2012 and 2011, is as follows: December 31, (in millions)
Fixed Income Funds Equity Funds: Index Growth Balanced Total Level 1 Investments General Account Total plan assets
2012
2011
$ 32.4
$ 30.1
95.1 29.2 27.3 $184.0 4.9 $188.9
88.5 25.4 24.1 $168.1 — $168.1
The underlying investments funds of the Separate Accounts are based on quoted market prices within an active market and as such are classified as Level 1. Amounts held in the General Account are valued at contract value, which is equal to fair value. Amounts held in the General Account are considered to be cash equivalents and are not subject to fair value evaluation. For financial reporting purposes, the prepaid benefit cost at December 31, 2012 and 2011, has been classified as a nonadmitted asset. The prepaid (accrued) benefit cost is as follows: December 31 (in millions)
Pension Benefits Other Benefits 2012
2011
2012
2011
Plan assets (lower than) PBO $ (90.7) $ (92.4) $(119.8) $(100.4) Unrecognized prior service cost 1.5 2.2 (2.8) .2 Unrecognized net loss from past experience different from that assumed 124.0 133.6 40.3 26.1 Prepaid (accrued) benefit cost, end of year $ 34.8 $ 43.4 $ (82.3) $ (74.1)
The Company funds the qualified noncontributory defined benefit pension plan in accordance with the requirements of ERISA. Plan assets at fair value for the qualified pension plan were $188.9 million and $168.1 million at December 31, 2012 and 2011, respectively. The actuarial present value of accumulated benefits for the qualified pension plan were $219.2 million and $211.3 million, at December 31, 2012 and 2011, respectively. Since the accumulated benefit obligation (ABO) for the qualified defined benefit pension plan of $219.2 million and $211.3 million at December 31, 2012 and 2011, respectively, exceeded the fair value of plan assets by $30.3 million and $43.2 million at December 31, 2012 and 2011, respectively, the Company increased the additional minimum pension liability by $27.0 million in 2011 and decreased the minimum pension liability by $12.9 million in 2012, both of which were recorded as a direct adjustment to the Company’s surplus. The $12.9 million decrease in the additional minimum liability in 2012 consists of a $20.5 million decrease in the liability that arose as a result of a change in one of the assumptions used in the valuation of the Company’s qualified pension plan liabilities offset, in part, by a $7.6 million increase related to the amount by which the ABO liability exceeded the fair value of plan assets at December 31, 2012. With respect to the assumption change, previously a single assumed retirement age for all participants of 62 was used. Effective January 1, 2012, assumed rates of retirement between 55 and 70 are being used, which is a better reflection of the Plan’s experience over the past ten years. The $7.6 million increase in the minimum pension liability was driven primarily by a .75% decrease in the discount rate used to calculate the plan’s liabilities at December 31, 2012.
46
The Company made contributions to its defined benefit plans of $10.2 million and $10.0 million in 2012 and 2011, respectively. The Company estimates that it will make a contribution of at least $10.0 million to this plan in 2013. Benefits expected to be paid from this plan total $9.9 million in 2013, $12.3 million in 2014, $15.9 million in 2015, $14.8 million in 2016 and $20.5 million in 2017. The aggregate benefits expected to be paid in 2018 through 2022 total approximately $119.7 million. The calculation of expected benefits is based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2012. The assumptions used in determining the aggregate projected benefit obligation for pension and other benefit plans were as follows: Weighted average assumptions at December 31
Discount rate Rate of compensation increase Expected return on plan assets
Pension Benefits Other Benefits 2012
3.75% 4.00% 9.50%
2011
4.50% 4.00% 9.50%
2012
3.75% 5.00%
2011
4.50% 4.00%
The Company’s overall expected long-term rate of return on plan assets was determined based upon the current projected benefit payout period and the current mix of plan investments, which generally consists of approximately 80% in equity investments and 20% in fixed-income investments. The Company believes that this investment mix properly matches the plan’s benefit obligations. The equity component of the expected long-term rate of return was determined using a combination of the actual rate of return of equities (net of inflation) and an inflation-adjusted equity rate of return (assuming an inflation rate of 4%) based upon historical 30-year rolling averages (with the most recent five years more heavily weighted). The health care cost trend rate assumption has an effect on the amounts reported for the postretirement benefit plans. The assumption is 6.5% for 2013, 6.0% for 2014, 5.5% for 2015, 5.0% for 2016, 5.0% for 2017 and 5.0% for 2018 and beyond. For example, increasing the assumed health care cost trend rate by 1.0% each year would increase the accumulated postretirement obligation for the plan as of December 31, 2012, by $1.5 million and the aggregate of the service and interest cost components of the net periodic benefit cost for 2011 by $.2 million. Benefits expected to be paid from this plan and the nonqualified deferred compensation plan total $9.7 million in 2013, $7.7 million in 2014, $13.7 million in 2015, $10.7 million in 2016 and $12.4 million in 2017. Aggregated benefits expected to be paid in the period 2018 through 2022 total approximately $78.2 million. The calculation of expected benefits is based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2012. Savings and Other Incentive Plans All employees may participate in a Company-sponsored savings plan under which the Company matches a portion of the employee’s contributions up to 6% of salary. The Company contributed $2.4 million and $2.5 million in 2012 and 2011, respectively. The Company also has a long-term performance-based incentive compensation plan for certain employees and directors. Shares under this plan are granted each year and generally vest over a three-year period. The value of such shares is equal to the number of shares multiplied by the current share price, which is determined by the level of total assets of the Company. A financial performance threshold measure must also be met in order to receive a payout at the end of the third year. The total expense incurred related to these plans was $11.6 million and $10.1 million in 2012 and 2011, respectively. At December 31, 2012 and 2011, the accrued liability related to these plans was $21.3 million and $20.4 million, respectively. 47
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS December 31, 2012 and 2011
6. COMMITMENTS AND CONTINGENCIES Rental expenses approximated $25.5 million and $24.7 million as of December 31, 2012 and 2011, respectively. The approximate minimum rental commitments under noncancelable operating leases are as follows: $4.8 million in 2013; $3.9 million in 2014; $3.2 million in 2015; $2.9 million in 2016; $1.7 million in 2017 and $1.8 million in 2018 and beyond. Such leases are principally for leased office space and certain data processing equipment, furniture and communications equipment. Certain office space leases provide for adjustments relating to changes in real estate taxes and other expenses. The Company is involved in various legal actions that have arisen in the course of the Company’s business. In the opinion of management, the ultimate resolution with respect to such lawsuits, as well as other contingencies, will not have a material adverse effect on the Company’s consolidated financial statements.
7. FEDERAL INCOME TAXES Effective January 1, 1998, Mutual of America’s pension business became subject to federal income tax. Mutual of America files its federal income tax return on a separate company basis. Mutual of America’s non-insurance subsidiaries file a consolidated income tax return. Mutual of America adopted SSAP No. 101, a replacement of SSAP No. 10R, effective January 1, 2012. During the first quarter of 2012, Regulation No. 172 was amended to adopt the provisions of SSAP No. 101. This guidance requires that a deferred tax asset (DTA) or deferred tax liability (DTL) be established for temporary differences between the tax and statutory reporting bases of assets and liabilities. The change in Mutual of America’s net DTA must be recorded as a separate component of gains and losses in surplus. Net DTAs are required to be recorded as an admitted asset to the extent that the amount will be realized within three years, subject to a maximum admitted asset equal to 15% of statutory surplus and to the Company’s risk based capital ratio exceeding certain thresholds. A reconciliation of the income tax (expense) recognized in the Company’s consolidated statutory financial statement of operations to the amount obtained by applying the statutory tax rate of 35% to net gain from operations before federal income taxes follows: December 31 (in millions)
2012
2011
Net gain from operations $ 44.6 $ 45.9 Statutory rate 35% 35% Tax at statutory rate (15.6) (16.1) IMR amortization 9.2 6.7 Realized capital (gains) losses (2.5) (1.5) Net capital gains (losses) deferred in IMR (15.0) (13.5) Change in nonadmitted assets (12.9) 6.5 Change in Mutual of America’s net DTA 31.6 8.7 Other 2.3 5.6 Federal income tax (expense) $ (2.9) $ (3.6) Effective tax rate 6.6% 7.8% 48
The federal income tax expense of $2.9 million in 2012 and $3.6 million in 2011 relates primarily to the Company’s non-insurance subsidiaries. The components of the net DTA recognized in the Company’s statement of financial condition are as follows: December 31 (in millions)
2012
2011
Total gross DTAs excluding unrealized (gains) losses $ 258.5 $ 293.1 Statutory valuation allowance adjustment — — Total adjusted gross DTAs excluding unrealized (gains) losses $ 258.5 $ 293.1 Total gross DTLs excluding unrealized (gains) losses (34.9) (37.9) Mutual of America’s net DTA 223.6 255.2 Tax effect of unrealized (gains) losses 5.7 3.2 DTA nonadmitted (157.8) (199.1) Mutual of America’s net admitted DTA 71.5 59.3 Non-insurance Subsidiaries DTA’s 3.5 5.0 Total net DTAs $ 75.0 $ 64.3
At December 31, 2012, the gross DTA including the tax effect of unrealized losses of $264.2 million consisted of $232.6 million of ordinary DTAs and $31.6 million of capital DTAs. As shown in the above table, Mutual of America’s net admitted DTA increased by $12.2 million during 2012. The tax effects of temporary differences that give rise to a significant portion of the DTAs and DTLs arise from the differing statutory and tax-basis treatment of assets and liabilities, insurance and annuity reserves, realized capital gains and losses on investment transactions, nonadmitted assets and net operating loss carryforwards. Included in such differences are items resulting from transition rules under the Internal Revenue Code as of January 1, 1998, which accompanied the change in taxation of Mutual of America’s pension business. The transition rules will continue to moderate Mutual of America’s current tax expense over the next several years. As such, Mutual of America incurred a federal income tax expense of $1.1 million in 2012 and $.7 million in 2011. The other $1.8 million in 2012 and $2.9 million in 2011 of the tax expense shown on the Consolidated Statement of Operations and Surplus relates to the operating results of the Company’s non-insurance subsidiaries. At December 31, 2012, the Company had consolidated net operating loss carryforwards of approximately $243.8 million, expiring at various dates between 2019 and 2029. On November 29, 2012, the Internal Revenue Service initiated an examination of the 2011 federal income tax return of the Company’s noninsurance subsidiaries. The Company believes that additional taxes, if any, assessed for the years under examination will not have a material effect on its financial position.
49
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS December 31, 2012 and 2011
8. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair values of financial instruments have been determined using available market information and the valuation methodologies described below. Considerable judgment is often required in interpreting market data to develop estimates of fair value for financial instruments for which quoted market prices are not available or an inactive market for the instrument currently exists. Accordingly, certain fair values presented herein (refer to Note 2) may not necessarily be indicative of amounts that could be realized in a current market exchange. The use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Amounts related to the Company’s financial instruments at December 31, 2012 and 2011, were as follows:
2012
2011
Statement Fair Statement Fair (in millions) Value Value Value Value
ASSETS
Bonds and notes $7,311.4 $7,841.1 $6,997.6 $7,436.2 Common stocks 24.0 24.0 44.8 44.8 Cash and short-term investments 17.6 17.6 7.1 7.1 Guaranteed funds transferable 24.2 26.6 30.3 35.3 Mortgage loans .7 .7 1.3 1.3 Policy loans 100.0 100.0 101.3 101.3 LIABILITIES
Insurance and annuity reserves $6,560.5 $6,761.1 $6,377.3 $6,562.6
Fixed Maturities and Equity Securities — Fair value for fixed maturities is determined by reference to market prices quoted by an independent pricing source. If quoted market prices are not available, fair value is determined using internal valuation models and techniques or based upon quoted prices for comparable securities. Fair value for equity securities is determined by reference to valuations quoted by an independent pricing organization. Cash and Short-Term Investments — The carrying value for cash and short-term investments approximates fair values due to the short-term maturities of these instruments. Guaranteed Funds Transferable — Fair value for guaranteed funds transferable is determined by reference to market valuations provided by the former reinsurer. Mortgage Loans — Fair value for mortgage loans is determined by discounting the expected future cash flows using the current rate at which similar loans would be made to borrowers with similar credit ratings and remaining maturities. Policy Loans — The majority of policy loans are issued with variable interest rates, which are periodically adjusted based on changes in rates credited to the underlying policies and therefore are considered approximate fair value.
50
Insurance and Annuity Reserves — Contractual funds not yet used to purchase retirement annuities and other deposit liabilities are stated at their cash surrender value. General Account policies are issued with variable interest rates that are periodically adjusted based on changes in underlying economic conditions. The fair value of immediate annuity contracts (approximately $1.0 billion at December 31, 2012 and 2011, respectively) was determined by discounting expected future retirement benefits using current mortality tables and interest rates based on the duration of expected future benefits. Weighted average interest rates of 3.50% and 3.81% were used at December 31, 2012 and 2011, respectively.
9. SIGNIFICANT DIFFERENCES BETWEEN STATUTORY ACCOUNTING PRACTICES AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) The accompanying financial statements are presented in conformity with statutory accounting practices prescribed or permitted by the New York Department (statutory accounting), which practices differ from GAAP. The significant variances between such practices and GAAP are described below. The Company has not computed the variance between Surplus and Net Income calculated in accordance with statutory accounting practices prescribed or permitted by the New York Department and GAAP, as there is no reporting requirement to do so and the costs involved exceed the benefits derived from these calculations. Generally, GAAP results in a more favorable presentation of the Company’s financial condition. Asset Valuations and Investment Income Recognition GAAP requires the Company’s bonds and notes to be classified as either held to maturity (HTM) or available for sale (AFS); whereas for statutory accounting, no such classification is required. In addition, for GAAP, AFS bonds and notes are carried at their fair value with the unrealized gains and losses applied directly to equity; whereas for statutory accounting, all bonds and notes in good standing are carried at their amortized cost. Realized capital gains and losses, net of applicable taxes, arising from changes in interest rates are recognized in income currently for GAAP accounting, rather than accumulated in the IMR and amortized into income over the remaining life of the security sold for statutory accounting. A general formula-based Asset Valuation Reserve is recorded for statutory accounting purposes, whereas such a reserve is not required under GAAP. For statutory accounting, certain assets, principally net deferred income tax assets not expected to be realized within three years, furniture and fixtures and prepaid expenses are excluded from the statement of financial condition by a direct charge to surplus; whereas under GAAP, such assets are carried at cost, net of accumulated depreciation. Policy Acquisition Costs Under GAAP, policy acquisition costs that are directly related to and vary with the production of new business are deferred and amortized over the estimated life of the applicable policies, rather than being expensed as incurred, as required under statutory accounting.
51
NOTES TO CONSOLIDATED STATUTORY FINANCIAL STATEMENTS December 31, 2012 and 2011
Insurance and Annuity Reserves Under statutory accounting practices, the interest rates and mortality and morbidity assumptions used are those which are prescribed or permitted by the New York Department. Under GAAP, for annuities, the interest rate assumptions used are generally those assumed in the pricing of the contract at issue; for disability benefits, the interest rates assumed are those anticipated to be earned over the duration of the benefit period. Mortality and morbidity assumptions are based on Company experience. Premium Recognition Insurance contracts that do not subject the insurer to significant mortality or morbidity risk are considered, under GAAP, to be primarily investment contracts. GAAP requires all amounts received from policyholders under these investment contracts to be recorded as a policyholder deposit rather than as premium income. Deferred Income Taxes GAAP requires that a deferred tax asset or liability be established to provide for temporary differences between the tax and financial reporting bases of assets and liabilities. Statutory accounting adopted similar accounting principles, except that deferred income tax assets (net of any required valuation allowance) are recognized for statutory accounting only to the extent that they can be utilized within three years; whereas for GAAP, all such assets are recognized (net of any required valuation allowance) regardless of when they will be utilized until they expire. All changes in deferred income tax assets or liabilities are recorded directly as a charge or benefit to surplus for statutory accounting purposes. Cash and Short-Term Investments The Statements of Cash Flows are presented in accordance with statutory accounting. This reporting format differs from GAAP, which requires a reconciliation of net income to net cash from operating activities. The statutory Statements of Cash Flows include changes in cash and short-term investments and also certain noncash related changes.
10. SUBSEQUENT EVENTS The Company has evaluated subsequent events through March 21, 2013, the date the financial statements were available to be issued, and no events have occurred subsequent to the balance sheet date and before the date of evaluation that would require disclosure.
52
Independent auditors’ report
The Board of Directors Mutual of America Life Insurance Company: We have audited the accompanying consolidated financial statements of Mutual of America Life Insurance Company and subsidiaries, which comprise the consolidated statutory statements of financial condition as of December 31, 2012 and 2011, and the related consolidated statutory statements of operations and surplus and cash flows for the years then ended, and the related notes to the consolidated statutory financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles As described in Notes 1 and 9 to the consolidated financial statements, the financial statements are prepared by Mutual of America Life Insurance Company using statutory accounting practices prescribed or permitted by the New York State Department of Financial Services, which is a basis of accounting other than U.S. generally accepted accounting principles. Accordingly, the financial statements are not intended to be presented in accordance with U.S. generally accepted accounting principles.
53
The effects on the financial statements of the variances between the statutory accounting practices described in Notes 1 and 9 and U.S. generally accepted accounting principles, although not reasonably determinable, are presumed to be material. Adverse Opinion on U.S. Generally Accepted Accounting Principles In our opinion, because of the significance of the variances between statutory accounting principles and U.S. generally accepted accounting principles discussed in the Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles paragraph, the financial statements referred to above do not present fairly, in accordance with U.S. generally accepted accounting principles, the financial position of Mutual of America Life Insurance Company as of December 31, 2012 and 2011, or the results of its operations or its cash flows for the years then ended. Opinion on Statutory Basis of Accounting In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated statements of financial condition as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended, in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services described in Notes 1 and 9.
New York, New York March 21, 2013
54
mutual of america officers
Thomas J. Moran
Chairman of the Board, President and Chief Executive Officer
Actuarial Consulting Mark Koehne, MAAA, EA
Senior Vice President and Actuary
Raymond Guinta
Second Vice President Michael P. Mulligan
Corporate Law
Employee Benefits
Thomas L. Martin
Thomas Ciociano
Second Vice President
Executive Vice President and Deputy General Counsel
Vice President and Actuary
Corporate Finance
Scott H. Rothstein
Senior Executive Vice President and Chief Financial Officer
Robert J. McElroy, MAAA, EA
George L. Medlin, CIA
William Rose
Judy Mui
William S. Conway, CLU, ChFC
Senior Executive Vice President and Chief Operating Officer John R. Greed, CPA
Senior Executive Vice President and Chief Marketing Officer James J. Roth
Senior Executive Vice President and General Counsel Amir Lear, CFA
Chairman and Chief Executive Officer Mutual of America Capital Management Corporation Thomas J. Dillman, CFA
President Mutual of America Capital Management Corporation Thomas Gilliam, CLU
Chairman and Chief Executive Officer Mutual of America Foundation Theodore L. Herman, CLU, ChFC
Vice Chairman Mutual of America Foundation
David M. Block, MAAA, EA
Vice President and Actuary Vice President Joanne Chang
Second Vice President Jenny B. Kim
Robert Healy, CAMS
Jared Gutman
William J. Krupskas
Executive Vice President and Chief Privacy Officer Administrative Services Dennis S. McManus, FLMI, ACS
Senior Vice President Debbie A. Rogers
Vice President
Rachelle Rossini
Second Vice President Kathleen L. Summers, FLMI, ACS, AIAA
Technical Services
Executive Vice President and Chief Actuary
Nicole Lanni, FLMI, ACS, CIA
Corporate Actuarial
Katherine Cannizzaro
Fanny F. Eng, FSA, MAAA, EA
Vice President and Actuary
Joseph A. Gross, FSA, MAAA
Vice President and Actuary
Andrew B. Hirschfeld, ASA, MAAA
Vice President and Actuary Steve Ngai, FSA, MAAA
Vice President and Actuary Jeffrey Tsai, FSA
Second Vice President and Actuary
Budget & Cost Accounting
Administrative Technical Services
Jeremy J. Brown, CLU, ChFC,
Vice President
Senior Vice President and Deputy Treasurer
Second Vice President
Second Vice President
Virginia A. Carlisi, FLMI, ACS
Chris W. Festog, CPA
Nicholas A. Branchina
Actuarial Services FSA, MAAA, EA
Executive Vice President and Treasurer
Senior Vice President
Senior Vice President Vice President Vice President Corporate Tax Harold J. Gannon
Senior Vice President Estelle E. Miller, CPA
Vice President
Financial Reporting Christopher M. Miseo, CPA
Senior Vice President and Director of Accounting and Financial Reporting John A. Schabhutl, CPA
Vice President and Deputy Director of Financial Reporting Thomas K. Ng
Second Vice President
Executive Vice President and Deputy General Counsel Anne Marie Carroll
Senior Vice President and Associate General Counsel Nicholas S. Curabba
Senior Vice President Jenny Lum, FLMI, ACS
Second Vice President Facilities Management Sean Carroll
Senior Vice President John Terwilliger, FLMI, ACS
Senior Vice President
Senior Vice President and Associate General Counsel
Hal Bacharach
James K. McCutcheon
James Griffin
Senior Vice President and Associate General Counsel Vincent R. Fitzpatrick, III
Vice President and Associate General Counsel Anne M. McCarthy
Vice President and Associate General Counsel Thomas M. Hogan
Vice President and Assistant General Counsel Amy M. Latkin
Vice President Vice President
James D. Gribbin
Second Vice President Human Resources Michael E. Conway, SPHR
Senior Vice President
Tanisha L. Cash, PHR, CCP
Senior Vice President
Thomas A. Harwood
Senior Vice President
Vice President and Assistant General Counsel
John R. Luebs
Enterprise Risk Management
Debra A. Branson
Joseph Hummel
Senior Vice President Vice President
Senior Vice President
Training & Leadership Development
FINRA/SEC Regulatory Compliance
Lynn M. Nadler, FLMI, ACS,
Kathryn Lu
AIAA
Senior Vice President
Senior Vice President
Executive Vice President and Chief Compliance Officer
Joseph Krakowski, ACS, AIAA
Financial Systems
Miro Beverin, FLMI, ACS
Brian J. Keogh
Eileen M. Tarasco
John P. O’Connor
Victor Fried, FSA, MAAA, EA
Joe Tsien
Human Resources & Corporate Services
Internal Audit
Barry S. Goldberg
Planning & Analysis
Daniel J. LeSaffre
Executive Vice President and Internal Auditor
Vice President
Vice President and Actuary Vice President
Cindy Y.W. Lee
Vice President
Thomas J. Poulakowski
Vice President
Kenneth F. Powers, CEBS, ACS
Vice President
Dawn C. Weissman
Vice President
Joseph Aurello
Vice President
Second Vice President
Maria L. Brophy
Senior Vice President Steven Duong, CPA
Vice President
Aferdita Gutierrez
Second Vice President Treasury Myron O. Schlanger, CPA, FLMI
Senior Vice President and Associate Treasurer
Vice President
Executive Vice President
Vice President Vice President
John J. Corrigan, CPA, CIA, CISA
Corporate Services
Diana H. Glynn, CPA, CIA, CISA,
Carson J. Dunbar, Jr.
Vice President
Senior Vice President James Buckland
Senior Vice President Timothy R. Johnson
Second Vice President
FLMI, ACS
Robert P. Kane, CIA, CFSA
Vice President
Hendrix J. Paul, CISA
Second Vice President
Second Vice President 55
mutual of america officers
Marketing & Corporate Communications Administration Sean A. Mannion
Vice President
Mario F. Bento
Vice President
John R. Gilbride
Vice President
Michael P. Heffernan, CEBS,
CLU, ChFC
Vice President Peter R. Skrzypinski, FLMI, ACS,
AIAA
Vice President Annette C. Henry, CLU
Field Vice President
Advertising, Direct Response & Telemarketing Ed Wonacott
Senior Vice President Frances Infantino
Vice President
Paul L. Morigerato
Vice President
Marcia Hudson
Second Vice President Linda M. Pistey
Second Vice President Competition & Research Paul O’Hara
Senior Vice President Matthew J. Malm
Second Vice President Corporate Communications & Strategic Planning Jeffrey M. Angelo
Executive Vice President Barbara Crane
Senior Vice President Michael J. O’Grady
Senior Vice President Robert W. Ruane, CLU
Senior Vice President
Florence Ferguson, ACS, AIAA
S. Albert Singh, FLMI
Jacqueline Sabella
Samuel M. Greene
Vice President
Executive Field Vice President, Western Region
Corinne Joffe
Michelle Olave, CFA
Martine A. Krause, ACS, AIAA
Louis A. Montanti, CEBS
Lydia Kieser
Marketing
Vice President
Vice President
Paul J. Lorenti, CEBS Kathleen M. Mullally, CLU, ChFC
Vice President
Executive Field Vice President, Mid-South Region
Kieran P. O’Dwyer
Scott Stankiewicz, CEBS, RPA,
Vice President Alfie Tucker
Vice President Taryn M. Lubin
Second Vice President Mary Ellen McCarren, FLMI, ACS
Second Vice President
Financial Consulting Services William G. Shannon
Senior Vice President Greg F. Auman
Vice President
Mary Ellen Dolan, CEBS
Vice President
Zohreh Ghaissari
Vice President
Mary E. Lepko
Vice President
Patricia R. Sawyers
Second Vice President Office of Technology-NY Dennis J. Routledge
Senior Vice President Information Security
James P. Vogel, CLU, ChFC, CRPS
LAN Administration/Solution Center/Telecommunications
Executive Field Vice President, Mid-West Region Executive Field Vice President, Mid-South Region
Vice President
Joseph Antonowicz
Vice President
Vice President
Justin Sheehan
Second Vice President Research James P. Accurso, CFA
Joseph R. Gaffoglio, CFA, CPA
Edward J. T. Kenney
MIS Business Applications
Executive Vice President Office of the Secretary Diane M. Aramony
Executive Vice President and Corporate Secretary/Assistant to the Chairman
Susan Watson
Vice President Phil Jordan
Vice President Mutual of America Capital Management Corporation Administration
Executive Vice President and Chief Information Officer
Thomas P. Kelly
Peter Nicklin
Client Services
Senior Vice President
Vice President
Paul Travers, CFA, FLMI
Kellie T. Thomas
Howard J. Rubin
Nancy McAvey
National Accounts/Institutional Funds
Sonia Samuels
Equities
Thomas E. MacMurray, CLU,
Salvatore P. Conza
Vice President
Executive Vice President and Chief Equity Strategist
Michael L. Ellis
Marguerite H. Wagner
Vice President
Executive Vice President
Ronald Fried
Fixed Income
Executive Vice President Senior Vice President Senior Vice President
Vice President Esther M. Lester, FLMI, ACS
Vice President
Senior Vice President Senior Vice President
Stephen J. Rich
Andrew L. Heiskell
Executive Vice President and Director of Fixed Income Gary P. Wetterau, CFA
Executive Vice President 56
Patrick J. Sullivan
Vice President
Susan J. Ferber
Senior Field Vice President
Vice President
Youlian Simov
Robert Giaquinto
Senior Vice President
Joseph P. O’Reilly
External Affairs
Brian Sullivan
Senior Vice President
Senior Vice President and Chief Marketing Officer
Vice President
Senior Vice President
ChFC, FLMI
Kevin M. Walsh
Senior Vice President and Director of Fixed Income Research
MIS Operations
Vice President
Second Vice President
William J. Doherty
Vice President Vice President
Vice President
Office of the Chairman, President & Chief Executive Officer
Joan M. Squires, CEBS
Joseph S. Reeves
Second Vice President
James T. Dixon, CISSP
Ann M. Norton
Vice President
Vice President
CRPS
Office of Technology
James W. Ward
Vice President
RPA, CRPS
Vice President
Annette Barbasch John P. Clare
Executive Field Vice President, Eastern Region Barbara Romine-Greene, CEBS,
Robert B. Kordecki, CLU
Vice President
James Gober
Vice President
Mary-Clare Swanke, FLMI, ACS
Senior Vice President
Sales Operations
Senior Vice President
Doreen M. Johns, CFA
Senior Vice President David W. Johnson
Senior Vice President Duygu Akyatan
Vice President
Evan B. Carpenter, CFA
Vice President
Kevin Frain, Jr.
Vice President John Korbis
Vice President Alexander Kotlyar
Vice President Grace Y. Lee
Vice President Isabel E. Macalintal
Vice President John Polcari
Vice President Jamie A. Zendel
Vice President
Alexander Ginis
Second Vice President Benjamin L. Heben
Second Vice President Robert J. Lewis, III, CFA
Second Vice President
Michael Mastrogiannis
Second Vice President
mutual of america regional offices
Akron, Ohio Frank E. Zugaro
Chicago, Illinois Christopher Conway, ChFC
Honolulu, Hawaii Lee M. Robinson
Milwaukee, Wisconsin Troy S. Johnson
New York City, New York Tyrone A. Golatt, FLMI
Marc A. Seymour
Pamela M. Kodrich
Paul T. Wierzba, CEBS, CRPS
Harry Harris
Embassy Corporate Park 3700 Embassy Parkway Suite 500 Akron, OH 44333-8377 Tel. (330) 665-1915
Four Westbrook Corporate Center Suite 240 Westchester, IL 60154-5736 Tel. (708) 836-0644
737 Bishop Street Suite 2305 Honolulu, HI 96813-3211 Tel. (808) 532-1055
Lisa A. Thurston, ACS, CRPS
Adyna Pressley
Houston, Texas Christopher Thompson
Anchorage, Alaska Dennis Dudley, CRPS
Cincinnati, Ohio Mark Deady, CEBS, CRPS
Two Park Plaza 10850 West Park Place Suite 520 Milwaukee, WI 53224-3637 Tel. (414) 359-1221
One Liberty Plaza 165 Broadway, Suite 4601 New York, NY 10006-1465 Tel: 212-587-9045
Regional Vice President Service Manager
Account Executive
Denali Towers South 2600 Denali Street Suite 502 Anchorage, AK 99503-2754 Tel. (907) 274-7449 Atlanta, Georgia Austin Ort, ChFC, CLU, CRPS
Vice President
Gregory S. Hibbert, CRPS
Service Manager
Five Concourse Parkway, NE Suite 1275 Atlanta, GA 30328-7102 Tel. (770) 396-9795 Baltimore, Maryland Michael R. Braney, CRPS
Regional Vice President Nathan Foster
Service Manager Court Towers 210 West Pennsylvania Avenue Suite 210 Towson, MD 21204-5301 Tel. (410) 825-7770 Boston, Massachusetts Christopher Bailey, ChFC, CRPS
Senior Field Vice President
James McAdams, CEBS, CRPS
Vice President
Westborough Office Park 1800 West Park Drive Suite 350 Westborough, MA 01581-3927 Tel. (508) 366-2418
Vice President Vice President
Senior Regional Vice President Stephen G. Yards, CEBS
Field Vice President Cristie A. Sams
Service Manager Turfway Ridge Office Park 7300 Turfway Road Suite 560 Florence, KY 41042-1386 Tel. (859) 283-1200 Dallas, Texas Jody A. Jurica, CEBS
Senior Field Vice President Dennis P. Berry
Vice President
Urban Towers North Suite 1420-N 222 Las Colinas Boulevard West Irving, TX 75039-5446 Tel. (972) 556-2371 Denver, Colorado Rosa R. Weyman, CRPS
Regional Vice President Barbara C. Regan
Associate Account Executive
Senior Field Vice President Shari M. Lavelle, FLMI, PCS
Second Vice President
3040 Post Oak Boulevard Suite 1250 Houston, TX 77056-6552 Tel. (713) 850-1371 Indianapolis, Indiana Mark Deady, CEBS, CRPS
Senior Regional Vice President JoAnn Bule, CEBS
Vice President
300 North Meridian Street Suite 1000 Indianapolis, IN 46204-1382 Tel. (317) 237-2190 Long Island, New York David J. Lynch
Senior Field Vice President Joseph Mullady, ACS
Vice President
Two Jericho Plaza, Suite 303 Jericho, NY 11753-1670 Tel. (516) 937-9177 Los Angeles, California Brian Q. Severin, CRPS
Second Vice President
Senior Regional Vice President
Plaza Tower One 6400 South Fiddler’s Green Circle Suite 1700 Greenwood Village, CO 80111-4961 Tel. (303) 694-6102
Shannon Moriarty, ACS, CRPS
Hartford, Connecticut Robert V. Fay, CEBS
Vice President
111 W. Ocean Boulevard Suite 925 Long Beach, CA 90802-7931 Tel. (562) 983-0407
Senior Regional Vice President Field Vice President Vice President
Minneapolis, Minnesota Troy S. Johnson
Senior Regional Vice President Beth A. Eberbach, FLMI, PCS
Vice President
Normandale Lake Office Park 8000 Norman Center Drive Suite 1110 Bloomington, MN 55437-1119 Tel. (952) 820-0089 Nashville, Tennessee LaDoverick Huggins
Senior Field Vice President
Melanie J. De Cant, FLMI, ACS
Service Manager
One Lakeview Place 25 Century Boulevard Suite 411 Nashville, TN 37214-3601 Tel. (615) 872-8223 New Orleans, Louisiana James Murphy, CRPS
Vice President
Senior Regional Vice President Vice President Second Vice President
Parsippany, New Jersey Michael J. Scott
Vice President
Stephen G. Weber
Vice President
Morris Corporate Center 300 Interpace Parkway Suite 260 Parsippany, NJ 07054-1125 Tel. (973) 299-8228 Philadelphia, Pennsylvania Charles P. Bagley CLU, ChFC, FLMI, CRPS
Vice President
William R. Gallagher
Field Vice President
Anthony C. DePiero, FLMI, ACS
Second Vice President
Blue Bell Executive Campus 470 Norristown Road, Suite 301 Blue Bell, PA 19422-2322 Tel. (610) 834-1754
Eileen Gettys, CEBS, CRPS
Phoenix, Arizona Benjamin D. Bartel, CRPS
Mariela M. Rodriguez, FLMI,
Ann M. Balzano
Field Vice President ACS, CRPS
Service Manager Three Lakeway Center 3838 North Causeway Boulevard Suite 3100 Metairie, LA 70002-8342 Tel. (504) 832-9055
Vice President Vice President
Biltmore Financial Center 2398 E. Camelback Road Suite 510 Phoenix, AZ 85016-9012 Tel. (602) 224-8080
Senior Field Vice President
Joy Beatrice-Cody, FLMI, ACS
Vice President
Somerset Square 95 Glastonbury Boulevard Suite 410 Glastonbury, CT 06033-4414 Tel. (860) 659-3610
57
Pittsburgh, Pennsylvania Patrick A. Ring
St. Louis, Missouri Ralph Joest, CRPS
Meghan McIntyre, ACS
Lawrence Grellner, CLU
Three Gateway Center Suite 2378 Pittsburgh, PA 15222-1011 Tel. (412) 391-1300
Duane Stumpp, ACS
Vice President Vice President
Queens, New York Tyrone A. Golatt, FLMI
Senior Regional Vice President Vincent T. Dragone
Field Vice President David C. Donohue
Vice President
Forest Hills Tower 118-35 Queens Boulevard Suite 1602 Forest Hills, NY 11375-7251 Tel. (718) 520-8998 Richmond, Virginia Robert Giorgi, CRPS
Vice President
Norman Watkins, Jr., ACS
Service Manager
Arboretum One 9100 Arboretum Parkway Suite 360 Richmond, VA 23236-3493 Tel. (804) 560-0023
Vice President
Field Vice President
Second Vice President The Sevens Building 7777 Bonhomme Avenue Suite 1710 St. Louis, MO 63105-1940 Tel. (314) 721-3123 San Diego, California Brian Q. Severin, CRPS
Senior Field Vice President James Tiensvold, CEBS
Field Vice President Janet Koblen, ACS
Vice President
Symphony Towers 750 B Street Suite 2860 San Diego, CA 92101-8132 Tel. (619) 544-0860 San Francisco, California Abbas Moloo, CEBS, CRPS
Vice President
Michael P. Malone, ACS, CRPS
Vice President
Rochester, New York Brian Thomas, CRPS
1333 North California Boulevard Suite 660 Walnut Creek, CA 94596-4504 Tel. (925) 937-9900
Edwin W. Wallace, FLMI, ACS
Seattle, Washington David Lim, CRPS
Vice President Vice President
Linden Oaks Office Park 90 Linden Oaks, Suite 210 Rochester, NY 14625-2808 Tel. (585) 264-9890
Regional Vice President Samuel P. Taber
Service Manager Alderwood Business Center 3400 188th St. S.W. Suite 440 Lynnwood, WA 98037-4773 Tel. (425) 778-8434
Southfield, Michigan James D. Fergusson, CLU, ChFC, CEBS
Senior Field Vice President Julie Malewski
Vice President
One Northwestern Plaza 28411 Northwestern Highway Suite 1100 Southfield, MI 48034-5518 Tel. (248) 351-4190 Tampa Bay, Florida Jeanne E. Tyre, ChFC
Vice President
Harrison Givens III, CEBS
Second Vice President
Bayport Plaza 3000 Bayport Drive Suite 950 Tampa, FL 33607-8408 Tel. (813) 281-8882 Tarrytown, New York Leonard Egan, CLU, ChFC, CRPS
Vice President Martha Sulca
Service Manager 120 White Plains Road Suite 120 Tarrytown, NY 10591-5588 Tel. (914) 332-0124 Washington, D.C. Renee Shew, CRPS
Vice President
Geoffrey Callan, CEBS
Field Vice President
Caroline Magruder, FLMI, ACS
Service Manager
One Research Court Suite 350 Rockville, MD 20850-6223 Tel. (301) 977-6717 West Palm Beach, Florida Ivan B. Gregory, CRPS
Regional Vice President Darlene M. Greene
Vice President
One Lakeside at Centrepark 1450 Centrepark Boulevard Suite 200 West Palm Beach, FL 33401-2280 Tel. (561) 471-1445
58
Mutual of America
National Telecommunications and Conference Center 1150 Broken Sound Parkway N.W. Boca Raton, FL 33487-3598
Before investing in our variable accumulation annuity contracts, you should consider the investment objectives, risks, charges and expenses (a contract fee, Separate Account expenses and Underlying Funds expenses) carefully. This and other information is contained in the contract prospectus or brochure and the Underlying Funds prospectuses. Please read the prospectuses and brochure carefully before investing. The prospectuses and brochure can be obtained by calling 1-800-468-3785 or visiting mutualofamerica.com. A variable accumulation annuity contract is suitable for long-term investing, particularly retirement. The value of a variable accumulation annuity will fluctuate depending on the value of its underlying Separate Account investment funds. At redemption, amounts placed in a variable accumulation annuity’s Separate Account may be greater or less than the principal amount invested. Generally, an annuity contract provides no additional taxdeferred treatment beyond that provided by a tax-qualified pension or retirement plan. Therefore, the annuity contract should not be selected based on this criterion. Statements made in this publication by clients of Mutual of America are not paid testimonials. These testimonials may not be representative of the experience of other clients and are not indicative of future performance or success. 1
http://www.ebri.org/publications/ib/?fa=ibDisp&content_id=4495
2
Withdrawals from our products are generally subject to a 10% federal tax penalty prior to age 59½, and current ordinary federal income taxes, although there are some exceptions.
3
Online Enrollment is not yet available in New York and Virginia.
4
The guidance and information provided by Mutual of America’s Financial Consultants are educational in nature and are not intended to serve as a primary basis for your investment decisions. No separate fee is charged by Mutual of America Life Insurance Company for Financial Consulting Services.
The Funds are funds of the registered investment companies that are made available by Mutual of America through the Separate Accounts of the Company’s group variable accumulation annuity contracts to fund employer pension and retirement savings plans. The Funds charge management fees and other expenses. The Separate Accounts also charge fees and expenses. For Section 401(a) defined benefit plans, the employer’s plan balance reflects the reduction of these expenses. For Sections 401(a), 401(k), 403(b) and 457 defined contribution individual accumulation plans, the participant’s account reflects the reduction of these expenses. The ratings computed by Morningstar, Inc., an independent financial publisher of investment data and analysis, were based on the reported performance of the Funds for the specified time periods, taking into account the reduction of Fund management fees and other expenses. These ratings enable an employer, for the employer’s plan, to compare the net investment performance of the Funds to the net investment performance of other funds, at a Fund-to-fund level. Because the ratings compare net investment performance at only a fund level, Separate Account expenses for Mutual of America’s group variable accumulation annuity contracts are not included in determining these Morningstar Ratings. If such Separate Account expenses were included, the ratings would be different, since the universe of funds to which these Funds are compared by Morningstar would be different. You should make certain that you are familiar with all charges assessed by Mutual of America and by other plan service providers through their separate accounts, other agreements or as service charges (even if from third-party providers), in conjunction with your evaluation of plan investment alternatives. Please consult the contract brochure or prospectus and the Funds prospectuses for information on expense reimbursements and voluntary expense limitations, which, if not made, might have affected these star ratings. 6
We guarantee that we will credit interest for the life of the contract to amounts in the Interest Accumulation Account of our General Account at a rate at least equal to the greater of (1) any contractual minimum guarantee provided by the contract or (2) the minimum rate required by applicable state law or, if no state law minimum rate is applicable to a contract, the guaranteed minimum credited interest rate will be set pursuant to National Association of Insurance Commissioners (NAIC) standard nonforfeiture law. The NAIC minimum rate is determined in accordance with a formula, and cannot be less than 1.00% or more than 3.00% in any event. We determine whether the application of the formula will change the minimum guaranteed rate each November, and any change is effective the following January 1 for that calendar year. The minimum rate for 2013 has been set at 1.00% in accordance with this formula. In addition, Mutual of America may credit interest to your contract amounts in the General Account at a higher rate that we declare from time to time and which may increase or decrease at our sole discretion, although we are not obligated to credit interest in excess of the minimum guaranteed rate. If you have an existing contract, you should refer to it before making a decision because it may have a guaranteed minimum rate in excess of the formula described above and the advertised declared rate. We compound interest daily on your contract amounts in the General Account to produce an effective annual yield that is equal to the stated interest rate. This guarantee is subject to Mutual of America’s financial strength and claims-paying ability.
7
While these ratings do not apply to the safety or investment performance of the Separate Account investment funds available under Mutual of America’s products, they do reflect the Company’s ability to fulfill its General Account obligations, which include its obligations under the Interest Accumulation Account, annuity purchase rate guarantees and annuity benefit payouts, as well as life insurance and disability income payments. Third-party ratings are subject to change.
Mutual of America’s Financial Consulting Services do not create an investment advisory or a fiduciary relationship (including under ERISA) between you and Mutual of America Life Insurance Company. Mutual of America Life Insurance Company and its Regional Financial Consultants do not provide tax or legal advice. Consult with your personal tax advisor or attorney for matters involving taxation and tax planning, and your attorney for matters involving personal trusts and estate planning. 5
The Morningstar Rating™ for funds, commonly called the star rating, is a measure of a fund’s risk-adjusted return, relative to funds in its category. For each Underlying Fund of a Separate Account investment fund (“Fund”) with at least a three-year history, Morningstar® calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a Fund’s monthly performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. The Overall Morningstar Rating for a Fund is derived from a weighted average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar metrics.
The Morningstar category for each Fund is determined solely by Morningstar in order to rate funds with similar investment styles. Funds included in each of the categories listed on the prior page, for relative comparison purposes, consist of Underlying Funds offered through insurance and annuity company products. Although Morningstar data is gathered from reliable sources, neither Morningstar nor Mutual of America can guarantee its completeness or accuracy. Past performance is no guarantee of future results. In addition, Morningstar does not rate money market funds. Therefore, no information regarding Mutual of America’s Money Market Fund is included. For the above comparative purposes, the number of funds rated by Morningstar in the following categories for the stated periods were for Conservative Allocation, 584 funds/3-year, 505 funds/5-year; for Moderate Allocation, 810 funds/3-year, 707 funds/5-year and 409 funds/10year; for Target Date 2000-2010, 139 funds/3-year, 117 funds/5-year; for Target Date 2011-2015, 136 funds/3-year, 84 funds/5-year; for Target Date 2016-2020, 179 funds/3-year, 132 funds/5-year; for Target Date 2021-2025, 121 funds/3-year, 77 funds/5-year; for Target Date 2026-2030, 179 funds/3year, 132 funds/5-year; for Target Date 2031-2035, 121 funds/3-year, 77 funds/5-year; for Target Date 2036-2040, 175 funds/3-year, 125 funds/5-year; for Target Date 2041-2045, 120 funds/3-year, 76 funds/5-year; for Retirement Income, 257 funds/3-year, 187 funds/5-year. © 2012 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
A.M. Best, Standard & Poor’s® and Fitch Ratings are independent rating agencies. Standard &
Poor’s® and S&P® are trademarks of Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc.
These press releases are available at mutualofamerica.com/ratings. Mutual of America Life Insurance Company, 320 Park Avenue, New York, NY 10022-6839, is a registered Broker-Dealer. Mutual of America® and Mutual of America-Your Retirement Company® are registered service marks of Mutual of America Life Insurance Company.
Design: Decker Design, Inc. Photography: John Madere Printing: RR Donnelley Photographs: Page 24 courtesy of Challenged Athletes Foundation. Page 25 courtesy of National Multiple Sclerosis Society.
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Mutual of America Life Insurance Company 320 Park Avenue New York, New York 10022 mutualofamerica.com