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Best’s News & Research Service - February 02, 2017 09:37 AM (EST)

A.M. Best Upgrades ICR of GPM Health and Life Insurance Company; Affirms Credit Ratings of Government Personnel Mutual Life

  • February 02, 2017 09:37 AM (EST)
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Oldwick //BestWire// - A.M. Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” from “bbb” and affirmed the Financial Strength Rating (FSR) of B++ (Good) of GPM Health and Life Insurance Company (GPM Health & Life) (Spokane, WA), a wholly owned subsidiary of Government Personnel Mutual Life Insurance Company (GPM) (San Antonio, TX). Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of GPM. The outlook of these Credit Ratings (ratings) is stable.

The ratings of GPM reflect its government personnel and senior market niche, strong risk-adjusted capitalization and continued statutory operating profitability. The company’s government personnel life insurance market niche remains an important component of its overall marketing strategies. The company has experienced fluctuating, although still profitable, statutory operating results in recent years that primarily have been driven by its core ordinary life business segment. Improved persistency and mortality experience have been able to offset the new business strain of its final expense product and lower net investment income. GPM’s ability to consistently produce statutory earnings, together with its high quality fixed-income and well-performing direct commercial mortgage portfolio has enabled the company to maintain a strong risk-adjusted capital position.

Partially offsetting these positive rating factors are the challenges GPM has faced in improving earnings and ordinary life premium growth. GPM has been challenged to improve its operating performance in recent years as new business expense strain, the company’s relatively high infrastructure costs and the continued low interest rate environment have limited statutory earnings growth. In response, the company has implemented cost management and revenue enhancement programs, strategies to conserve profitability of businesses and initiatives to improve agent productivity and persistency. Furthermore, the company has introduced new products and modified existing products to maintain its competitive position in its niche.

Additionally, A.M. Best continues to monitor closely GPM’s high exposure to commercial mortgages. Although commercial mortgage loans as a percentage of the total investment portfolio have been decreasing recently, they still represent more than 100% of its capital and surplus. However, these concerns are mitigated partially by the historically consistent performance of the commercial mortgage loan portfolio.

The upgrade of GPM Health & Life’s (formerly North Coast Life Insurance Company) Long-Term ICR reflects the company’s improved stand alone credit profile and A.M. Best’s view of the increasing strategic importance of GPM Health & Life to the GPM organization, as evidenced by its functional integration within the organization, its adequate and improving risk-adjusted capitalization, improved quality of capital following its acquisition by GPM, and most recently in the decision to change the company’s name to GPM Health & Life and to more closely align its marketing efforts with GPM’s strategy. Offsetting rating factors include GPM Health & Life’s limited business profile and scope of operations, declining ordinary life premiums and continued high level of interest rate risk.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.

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