MADISON, Wis. – CUNA Mutual Group is hailing a return to the black for 2009, to the tune of $50 million, after a $150 million loss for 2008.
The good news for the credit union movement comes a day after CUNA said it returned to the black last year, after two years in the red.
CUNA Mutual President Jeff Post attributed the return to profitability to the returns on the credit union insurer’s vast bond portfolio. Post told Credit Union Journal the huge spreads in the bond market of 2008 narrowed considerably in 2009 to all-time lows, meaning the company did not have to report the unrealized losses it showed one year earlier and also boosting performance on its own holdings.
Losses on mortgage-backed securities held by the company have been relatively negligible, Post said, adding that while many focus on the income statement, equally important is that assets are up $1.2 billion year over year.
CUNA Mutual has largely escaped losses and even potential exposure as a result of the meltdown among corporate credit unions, Post said. The company did not insure U.S. Central FCU, and it provided coverage to WesCorp FCU only against fraudulant activity, he added.
Post said 17 of the 21 corporate credit unions CUNA Mutual had been providing bond coverage to have renewed with the company; the other four have sought coverage elsewhere after it repriced that coverage.
CUNA Mutual’s operating gain for 2009 is expected to be approximately $80 million after taxes, according to Post. The sale of its Canadian subsidiary during the year also boosted its net.
Post, who built a significant investments operation within CUNA Mutual after taking over as CEO, said CUNA Mutual currently holds "zero equities" and that it remains "very concerned" about the market.
The company will also report a GAAP surplus of $1.599 billion, an increase of $395 million over 2008, and a risk-based capital ratio of 330%-340%. CUNA Mutual paid $883.1 million in claims in 2009, up from $852 million one year earlier.
