Penn Mutual Life Insurance Harvard Case Solution & Analysis

Situation analysis

The Penn Mutual Life Insurance company, which is usually referred as Penn Mutual, is a company that was founded in Philadelphia, Pennsylvania. It has been established since 1847. Penn Mutual is the seventh mutual life insurance company in America. The current situation in hand is launching its product in the city of Yuma to expand its market reach. Penn Mutual is stabilizing on its financial strength and it can do well by expanding into new markets where there is potential.

Product offering

As a mutual company Penn Mutual is dedicated to serving its policyholders. They have a long term perspective as their purpose to make the decisions that best assist their policyholders and they work their best to ensure long term viability and well being for them.

The company offers life insurance policies for three distinctive categories; individuals & families, small businesses and financial professionals. Under these categories their product range varies from planning strategies, college supplement funding, executive bonus insurance plan, retirement plans, business continuation plan and much more.

A distinctive feature of its product portfolio is the life insurance policies it offers for women. They operate services for women as my worth portfolio, to meet the increasing competition in that sphere, but more importantly because Penn Mutual takes into account the factor that more and more women are entering the workforce and own businesses and they earn more than men. Their product category includes: products for widowed or divorced women, women who are playing the role of parents, women who are living alone and much more.

Market Summary

The USA mutual fund industry, with $13 trillion worth of assets, remained the largest in the world at the end of the year 2012. From $1.4 trillion the total net assets increased from the end of the year 2011, which was boosted by the growth in equity, hybrid fund assets and bonds. The demand was increased in 2012 for mutual funds, with the new cash flows n the mutual funds industry totaling $196 billion. There were a number of factors which were said to be the reason for driving the investor demand for certain types of mutual funds. It is believed, that in large part, it is driven by a trend towards investment diversification, population of USA and its demographics, and the uncertainty that surrounds the fiscal cliff at year end. The inflows for the bond funds were strong, while the withdrawals from equity funds also saw a rise. It is the fifth year since it continuously saw outflows. Hybrid funds maintained their popular position with the inflows rising again in the year 2012. After almost three years of considerable outflows money market funds went through a small net outflow of the amount less than $500 million. (Investment Company Institute 2013).

Mutual funds industry has been a very important intermediary for financial markets, especially the equity market. The industry provides liquid and low cost shares in diversified portfolios for financial assets. The industry facilitates the households to enter the market of finance. It is reported that about half of the households in USA now own shares in mutual fund.

Since the year 1990, total mutual fund assets in USA have increased nearly sevenfold and the investments in stocks have grown even with a greater margin.

As we can see the popularity of the mutual fund as an investment is growing, their importance has also grown side by side in the financial market. It currently holds about 1/5th of the publicly traded corporate equities in USA. Thus, we may be able to say that, in theory, behavior of mutual fund market shareholder can influence equity market prices. (Lehnert 2000).

Appendix 1 represents the share of American Mutual funds market in the world.

The US mutual fund assets market consists mainly of long term funds. 45% of the mutual funds industry comprised of equity funds by the end of the fiscal year 2012. The funds that invest directly in the shares of local American companies are known as Domestic equity funds and they comprise 33% of the entire funds industry. 12% of the fund’s assets industry is accounted for by the World Equity funds which are through investments in the shares of non US companies. 26% of the US mutual funds assets are comprised of bonds funds. 21% comprises of money market funds and 8% is comprised of hybrid funds, these combined hold the remainder of the USA mutual funds assets.(The Associated Press 2014)

In the year 2013, 700 or more sponsors were utilized to manage the mutual funds assets in America. A group of firms or a single firm does not have monopoly over the American mutual funds assets as the competition is long run. For instance the companies which are at the top 25 rankings in the year 1995 now only 15 of these are coming in the top ranking in 2012. The Herfindahl-Hirschman Index helps measure the market share. It not only measures the number but also the market share size of the company in the market...........................

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