A.M. Best Affirms Credit Ratings of Lifetime Income Limited
08 December 2017 - 9:58AM
Business Wire
A.M. Best has affirmed the Financial Strength Rating of
B- (Fair) and the Long-Term Issuer Credit Rating of “bb-” of
Lifetime Income Limited (LIL) (New Zealand). The outlook of
these Credit Ratings (ratings) is stable.
The ratings reflect LIL’s balance sheet strength, which A.M.
Best categorizes as adequate, as well as its marginal operating
performance, very limited business profile and marginal enterprise
risk management (ERM).
Throughout its development phase, A.M. Best expects LIL to
maintain a level of on-balance-sheet capital that is sufficient to
support the projected business activities. Although the company has
strengthened its local regulatory capital position, the solvency
margin in absolute dollars remains modest relative to other life
insurers rated by A.M. Best. In addition, LIL’s business plan calls
for moderate reliance on dynamic hedging in the longer term as the
business continues to grow.
Similar to many other start-up operations that are yet to build
a supportive base of business, LIL’s historical operating
performance has been pressured by low revenue paired with high
fixed costs. Nevertheless, A.M. Best does not expect much
volatility in the company’s operating performance, as the variable
annuity (VA) product it offers has a low-risk product design and
there is an appropriate hedging strategy in place.
LIL is a newly formed insurance operation that sells a very
narrow range of life insurance products within New Zealand. While
A.M. Best expects the company’s in-force portfolio to be profitable
in the long run, the current scale of business is small, which
makes it relatively more susceptible to unforeseen risks than
insurers whose businesses are more established and diversified. In
addition, its core product – a VA with guaranteed lifetime
withdrawal benefits – is still at the introductory stage of the
product life cycle in New Zealand.
LIL has an adequate ERM framework given the operation’s expected
size and complexity. Nevertheless, it may take time for LIL, as a
start-up life insurer, to prove that its risk management
capabilities are well-aligned with its risk profile.
Positive rating actions are possible in the long term if LIL is
able to demonstrate a track record of growth that allows it to
generate appropriate and sustainable returns. Conversely, factors
that may lead to negative rating actions include LIL’s local
regulatory solvency margin falling below target due to adverse
movements in interest rates or equity markets. Additionally, LIL’s
ratings may experience downward pressure if its holding company’s
consolidated risk-adjusted capitalization falls short of A.M.
Best’s expectations.
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.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating
Services, Inc. and/or its subsidiaries. ALL RIGHTS
RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20171207006304/en/
A.M. BestJason Shum, +65 6303
5020Associate Director,
Analyticsjason.shum@ambest.comorChristopher Sharkey,
908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorChi-Yeung Lok,
+65 6303 5016Director,
Analyticschi-yeung.lok@ambest.comorJim Peavy, 908-439-2200,
ext. 5644Director, Public
Relationsjames.peavy@ambest.com