Best’s News & Research Service - April 30, 2008 09:35 AM (EDT)
A.M. Best Affirms Ratings of Gerber Life Insurance Company
OLDWICK, N.J. //BestWire// - A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of Gerber Life Insurance Company (Gerber Life) (White Plains, NY). The outlook for both ratings is stable.
Gerber Life was acquired in August 2007 by Nestlé SA (Nestlé) of Switzerland [Swiss: NESN] from Novartis. Nestlé is a food and beverage conglomerate with operations in almost every country around the world.
The ratings of Gerber Life primarily reflect the company’s sound capitalization and profitability, the continuing growth in net premiums written and its position as a leading writer through the direct response marketing channel. The company has experienced positive operating results over the past five-year period in both its core ordinary life and stop-loss lines of business. However, net operating gains have declined in recent periods primarily due to one time transaction costs associated with Gerber Life’s divestiture from Novartis as well as increased marketing expenses as the company pursues its growth strategy in the juvenile life insurance market.
While Gerber Life has experienced favorable ordinary life premium trends, total direct premiums have declined in recent periods due to lower levels of stop-loss business. The company’s use of reinsurance leverage remains high for this line of business, albeit somewhat reduced over the past few years. A.M. Best believes that the stop-loss market is cyclical in nature and is currently in a soft market phase. As a result, Gerber Life may continue to be challenged to increase future top line growth. Additionally, A.M. Best notes that stop-loss earnings have recently trended down and represent a significant portion of Gerber Life’s overall earnings. A.M. Best will continue to monitor the company’s ability to increase premium growth in both its ordinary life and stop-loss lines of business, while maintaining adequate levels of profitability going forward.
For Best’s Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.