Best’s News & Research Service - December 19, 2018 11:37 AM (EST)
AM Best Affirms Credit Ratings of Fidelity Life Assurance Company Limited
- December 19, 2018 11:37 AM (EST)
Singapore //BestWire// - AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Fidelity Life Assurance Company Limited (Fidelity Life) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Fidelity Life’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Fidelity Life’s balance sheet strength is underpinned by risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which is at the strongest level. During 2018, the company’s capital adequacy was bolstered by a capital raising of NZD 75 million (USD 51 million), which resulted in shareholders’ equity surpassing NZD 320 million at the end of June 2018. The capital injection also led to a strengthening in the company’s local regulatory solvency position, which is expected to support planned business growth over the medium term. A partially offsetting balance sheet factor remains the company’s dependence on reinsurance, with over 40% of gross written premiums ceded to reinsurers in fiscal year 2018.
Fidelity Life has a track record of adequate operating performance, evidenced by a five-year average return on equity ratio of 9% (fiscal years 2014-2018). In recent years, overall earnings have been driven by the company’s favorable loss experience, albeit partially offset by its elevated expense ratio, when compared with other life insurers in New Zealand. Prospectively, AM Best expects a program of planned expense improvements, a robust pricing strategy and steady revenue growth, to support the maintenance of adequate operating performance.
AM Best views Fidelity Life’s business profile as neutral, underpinned by its position as the third-largest life insurer in New Zealand. The company has a domestic market share of more than 10% based on 2018 in-force gross written premiums. The company offers a range of life protection products, including term life, income protection and trauma cover. Fidelity Life remains subject to competitive market conditions in New Zealand’s life insurance sector, and its business model continues to exhibit a reliance on the independent financial adviser channel to distribute its products.
AM Best views Fidelity Life’s ERM framework as developed and its approach to managing risk appropriate given the size and complexity of the company.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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