A.M. Best Revises Outlook to Negative for Gerber Life Insurance Company

A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit rating (ICR) of “a” of Gerber Life Insurance Company (Gerber Life) (White Plains, NY). Gerber Life was acquired in August 2007 by Nestlé SA (Nestlé) (Switzerland) [Swiss: NESN] from Novartis. Nestlé is a food and beverage conglomerate with operations in almost every country around the world.
In revising the outlook to negative, A.M. Best notes the deteriorating levels of statutory profitability within Gerber Life’s ordinary life line, a decline in risk-based capital resulting from substantial realized losses in its investment portfolio and a modest decline in new business sales during the second half of 2008. While Gerber Life continues to maintain a solid level of risk-based capital despite the 2008 decline, the company continues to maintain a sizeable unrealized loss position on its remaining investments. A.M. Best notes that the company has some exposure to structured securities, including residential and commercial mortgage-backed securities and other asset-backed securities. Although the majority of these securities are in the higher-rated tranches, A.M. Best believes that some of these securitized investments, especially within the commercial mortgage-backed sector, could be at risk of impairment over the near term.
The affirmation of Gerber Life’s ratings primarily reflects its solid level of risk-adjusted capitalization, good earnings diversity through is two primary uncorrelated lines of business and the favorable overall premium growth trends in its ordinary life product line. Utilizing the Gerber Products (Gerber) company logo, Gerber Life enjoys good brand recognition within the market place, which has benefited the company as it continues to focus on the juvenile life insurance market through its direct-to-consumer marketing strategy. As a result, the company has experienced favorable trends in premium production over the past five-year period in its core ordinary life line of business.
However, A.M. Best notes that new business sales declined modestly during the second half of 2008. A.M. Best believes that the company may be challenged to increase new sales in the near term due to the recessionary economic environment. In addition, operating profitability has declined substantially over the past five-year period due to increased marketing and acquisition costs, as well as other one-time costs associated with its divestiture from Novartis. While favorable operating results continue to be generated from Gerber Life’s group accident and health line business, A.M. Best will be monitoring the company’s ability to increase top-line growth while improving operating profitability in its core ordinary life product line going forward.

Military members may still be owed money from life insurance settlement

The Missouri Department of Insurance says military service members in the state may be owed some of the $2.3 million dollars still unclaimed from a national settlement in 2006 with a life insurance company.
Missouri was one of 46 states that settled with American-Amicable Life Insurance Company of Texas and two of its affiliates – Pioneer American Insurance Company and Pioneer Security Life Insurance Company.
The National Association of Insurance Commissioners (NAIC) has installed a search feature on its Web site, naic.org, allowing service members to enter their first and last name to see if they are eligible for compensation under the settlement. The link is on the left-hand side of the Web page and says “Military Servicemember Policyholder Search.”
The agreement between the insurance company and the states followed allegations that American-Amicable and its two affiliates violated insurance and consumer protection laws in the sale and marketing of life insurance products to members of the U.S. military.
“More than 14,000 service men and women nationwide are still owed money from this settlement, and it’s our hope that this online search feature will help them access the money they’re entitled to,” said John M. Huff, director of the Missouri Department of Insurance, Financial Institutions and Professional Registration (DIFP).
Consumers without Internet access can get assistance from the DIFP by calling the Insurance Consumer Hotline at 1-800-726-7390.
The Missouri Department of Insurance, Financial Institutions and Professional Registration (DIFP) is responsible for consumer protection through the regulation of financial industries and professionals. The department’s seven divisions work to maintain consumer confidence by examining and monitoring industries and professions and by establishing coherent and evolving policies. DIFP works to enforce state regulations both efficiently and effectively while encouraging a competitive environment for industries and professions to ensure consumers have access to quality products.