José S. Suquet
Chairman, President and CEO
The past 18 months the financial markets in the United States, and now the world, have been in turmoil as a result of the housing and mortgage crisis.
As we assess the residual impact these issues may yet have on the global economy, I want to assure you that Pan-American Life is well insulated from the specific circumstances that led to the troubles affecting these companies.
From our perspective, these conditions have arisen in large part because of investments made in sub prime mortgages at the time of an overheated housing market. Fortunately, we have had no exposure whatsoever to Sub prime Mortgages, Alt-A Mortgage Loans, Credit Default Swaps, Collateralized Debt Obligations or Collateralized Loan Obligations, securities that have all been under considerable distress. Consequently, we experienced no losses or any impairment or valuation issues with regard to these types of troubled securities.
The financial impact to Pan-American Life of the turmoil in credit and financial markets in 2008 is measured in credit losses and impairments equivalent to 0.75 percent of consolidated investable assets, which is less than 3 percent of beginning-of-the-year GAAP equity. The market value of our bond portfolio ended 2008 with a market value of 90.6 percent.
Fitch reported on Pan-American Life's financials on July 11, 2008 which gave the Company an "A" rating. The following are excerpts from Fitch Ratings report about Pan-American Life:
- "Fitch believes that Pan-American Life operating profitability continues to improve and become more stable as management focuses on streamlining operations."
- "Fitch anticipates that Pan-American Life balance sheet strength will continue to be the key driver of its Stable rating over the medium term."
- "Fitch anticipates that Pan-American Life Prism score will remain in the 'AAA' range for the full years 2007 and 2008."
- "Fitch views Pan-American Life liquidity risk as modest given its liability structure. Liquidity is supported by publicly traded investment-grade bonds and cash of about $1 billion at March 31, 2008."
Pan-American Life maintained its rating score of "A-" with a "Positive Outlook" from A.M. Best affirmed January 31, 2009. Given that the rating agencies all have negative outlooks on the entire insurance industry; this is a significant achievement for Pan-American Life.
At Pan-American Life we remain focused on our core insurance business, which has allowed us to maintain a strong financial footing, even in these uncertain times. We will continue to be vigilant of market trends and practice sound asset management in order to safeguard the financial interests of our policyholders. You can also be confident that Pan-American Life is taking the proper steps so that when the country and the world emerge from the current financial crisis we are in a position to capitalize on the opportunities that lie ahead.