Mutual of Omaha Statement on Standard & Poor's Rating Action of May 24, 2011

Citing the impact of the company's Medicare Supplement Plan N product on their earnings expectations, Standard & Poor's has lowered Mutual of Omaha's rating one notch, from AA- to A+ (strong). Standard & Poor's also revised Mutual of Omaha's outlook upward to stable from negative.

"Despite this action, it is important to note that Mutual of Omaha is a strong, stable company," said Executive Vice President and Chief Financial Officer Dave Diamond. "We continued to be profitable in the first quarter, thanks to the earnings resulting from the strong financial performance of our other products and business units."

Plan N was one of the new Medicare Supplement plans provided for last year under the federal modernization of such plans. It was offered with limited underwriting for health conditions. The pricing of the plan was not sufficient to manage the claims experience, which was greater than projections, Diamond said.

"We have already taken numerous corrective actions, including halting sales of Plan N products and filing for appropriate premium adjustments to mitigate the financial impact of the poor claims experience," Diamond said. "In addition, we are proactively addressing the impact on earnings with targeted expense reductions and other actions."

In its rating announcement, Standard & Poor's acknowledged the company's strength: "Mutual of Omaha maintains a very strong competitive position stemming from its very strong franchise value. The company's earnings, although diminished, are strong as all of the group's remaining products in its diverse product portfolio are performing at expectations."

The A+ rating is the fifth highest of Standard & Poor's 21 ratings and is indicative of a "strong capacity to meet financial obligations."

Mutual of Omaha's financial strength remains intact, with a surplus of well over $2 billion, Diamond said. "We have an exceptionally sound business strategy that allowed us to thrive and grow during one of our nation's most severe economic downturns. And we have one of the most talented, innovative, engaged and hard-working teams in the industry."