A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of
"a-" of Fidelity Life Assurance Company Limited (Fidelity Life) (New Zealand). The outlook for both ratings is stable.
"It is great to see that at a time when the insurance industry is
going through a tough and changeable climate, we
have continued to maintain our A- rating for the
16th consecutive year,” says Fidelity Life Chief Executive, Milton Jennings.
A.M Best commented that the ratings reflect Fidelity Life’s strong risk-adjusted capitalisation, consistent profitability, as well as its improving lapse rates and experience profits.
Consistent profitability and high earnings retention have helped the company to continuously grow its capital position the past five years. Fidelity Life’s capital position increased by 15% to NZD 129 million in the year ending June 2011, while underwriting and asset risks remained relatively stable. As a result the company’s risk-adjusted capitalisation strengthened during the year.
Fidelity Life saw an improvement in its lapse rates during fiscal year 2011, reflecting a decline in the overall market lapse rate, as well as Fidelity Life's commission and pricing structure that is aimed at rewarding persistency. Experience profits turned positive during the year. Together with planned profit margins and continued positive investment experience this helped the company to increase net profits to NZD 18 million in 2011.
Partially offsetting these positive rating factors is the impact of competitive pressure on Fidelity Life and the subdued economic environment on its prospective profitability.
Competition is increasing in the non-tied adviser channel, which is the company's primary distribution channel. This could adversely impact Fidelity Life's policy acquisition costs, lapse ratios and profitability going forward. The subdued economic environment could constrain Fidelity Life's ability to grow in an environment with higher regulation and taxation costs.
The A.M. Best financial strength rating relates to Fidelity Life's insurance business, not money invested in any Fidelity Life investment funds or the Fidelity KiwiSaver Scheme.
The principal methodology used in determining these ratings is Best's Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilised include: "Understanding Universal BCAR” and "Risk Management and the Rating Process for Insurance Companies". Methodologies can be found at
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