KBRA affirms the insurance financial strength rating (IFSR) of A- for GCU, a fraternal benefit society domiciled in Beaver, Pennsylvania. The Outlook is Stable.  

The rating reflects GCU’s continued favorable growth trends in surplus and overall capital base that remain underpinned by its demonstrated, consistent trends of profitability. The company’s balance sheet and membership base continue to grow despite a depressed interest rate environment for much of the last decade as well as unfavorable trends in the fraternal industry.

GCU has historically successfully demonstrated its ability to adjust crediting rates and maintain relatively healthy spreads. While spreads have compressed more recently, financial results remain favorable. The company remains focused on controlled, strategic growth of its suite of products, particularly its fixed indexed annuity product. Writings of whole life and final expense product continue to increase year over year as well. Balancing these strengths is GCU’s noteworthy exposure to spread compression within its legacy annuity block due to moderately high minimum guaranteed crediting rates, particularly given the current rate environment, increased disintermediation risk, and an increasingly competitive landscape. Although manageable, the company’s investment portfolio has notable exposure to reinvestment and credit risk; however, the higher interest rate environment provides a more favorable setting to replicate GCU’s historical trend of robust returns.

GCU’s business mix ultimately remains concentrated as reserves are almost entirely interest sensitive. While increased life sales is a strategic focus, material expansion of its geographic reach and diversification of business mix will more likely occur over the medium to long term.

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