Best’s News & Research Service - June 24, 2021 09:37 AM (EDT)
AM Best Withdraws Credit Ratings of Lifetime Income Limited
- June 24, 2021 09:37 AM (EDT)
Singapore //BestWire// - AM Best has maintained the under review with negative implications status for the Financial Strength Rating of B- (Fair) and the Long-Term Issuer Credit Rating of “bb-” (Fair) of Lifetime Income Limited (LIL) (New Zealand). Concurrently, AM Best has withdrawn these Credit Ratings (ratings) as the company has requested to no longer participate in AM Best’s interactive ratings process.
These ratings were placed under review with negative implications on 5 November 2020, following regulatory licence conditions imposed on LIL by the Reserve Bank of New Zealand (RBNZ), which would require the company to hold additional capital margins in excess of existing regulatory minimums to better withstand severe adverse scenarios that might occur in the future. These licence conditions also followed volatility in the company’s regulatory solvency position, with breaches of the minimum solvency margin identified in fiscal year 2020.
The under review with negative implications status was maintained on 22 January 2021, as LIL’s parent group, Retirement Income Group Limited, had been unable to raise sufficient new capital to meet the additional regulatory capital requirements of the licence conditions at LIL, and whilst the company was considering alternative regulatory capital options, in consultation with the RBNZ and the Financial Markets Authority.
Subsequently, in March 2021, LIL communicated to its variable annuity policyholders with investment holdings in the Lifetime Income Fund (LIF) to advise that the fund would be wound up. Policyholders were given the option to either transfer their investment to an alternative fund with income payments not supported by an insurance guarantee, or have their account balances returned to them. In light of the LIF wind up, policyholders are expected to receive a supplementary payment to recognise the loss of the income guarantee previously provided by LIL.
LIL has since completed the wind up of the LIF in May 2021, including execution of the associated policyholders’ chosen options. At this time, the value of the supplementary payment to be made to variable annuity policyholders remains uncertain and is subject to approval by the RBNZ, supported by legal and actuarial advice.
The maintenance of the under review with negative implications status reflects continuing uncertainty over LIL’s prospective balance sheet strength, including the materiality of the supplementary payment, which remains undetermined at this time, and the company’s ability to comply with its licence conditions during the runoff of its remaining unit-linked, fixed and variable annuity liabilities.
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 AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.