Western & Southern Financial Group has agreed to a $1.55 billion deal with Nestlé S.A. that could bring ownership of Gerber Life Insurance Company back to the United States for the first time since 1994.
Western & Southern says the deal would include a long-term license to use Gerber Life intellectual property in connection with financial services.
Gerber is the company that owns the rights to the “Gerber baby” illustration, and Gerber Life has operated one of the most visible life insurance marketing programs in the United States.
In the past year, for example, the company has posted an ad video that attracted 2.5 million views on YouTube. Gerber Life is the only U.S. life insurer that ranks in the top 10 in terms of views, in the past year, for videos that show up in a YouTube search for the term “life insurance.”
Gerber Products is a baby food maker that was founded in 1927 in Michigan.
Gerber began selling life insurance in 1967.
The company as a whole merged with a Swiss pharmaceutical maker, Sandoz, in 1994. Sandoz eventually emerged with another company to form Novartis.
Novartis sold Gerber as a whole to Nestlé, in 2007, for $5.5 billion.
Gerber Life now has 3.6 million individual life policies in force, with average value of about $14,000 in death benefits per policy.
The deal with Western & Southern includes only the life insurance company and rights to use Gerber Life intellectual property, not the baby food operations.
Western & Southern
Western & Southern is a Cincinnati-based life insurer that was founded in 1888.
The company is a major writer of life insurance and annuities, and it controls or manages about $75 billion in assets.
The company says it’s making the deal because it wants to diversify its sources of revenue.
The Gerber Life deal “will expand Western & Southern’s policyholder base and enhance its product profile by increasing its ratio of life insurance business to annuity business.” Western & Southern says.
Western & Southern says it plans to keep Gerber Life’s 500 employees in place at their current location, in Fremont, Michigan.
Rating Agency View
Analysts at Fitch Ratings say they expect to see the deal close by March 31.
Completing the deal would give Western & Southern “immediate synergies through the build out of [the] direct-to-consumer division, along with the marketing power of the strong and recognizable ‘Gerber’ brand,” the analysts write in a comment.
Western & Southern has many strengths, and it looks as if it will get even stronger over time, but, “partially offsetting these strengths are the company’s continued business shift to more spread-based annuity products and its resulting increased exposure to market-related and interest rate risk exposures,” the analysts write.
— Read Fixed Index Annuities and Variable Annuities Are Good Guys, on ThinkAdvisor.