HONG KONG--(BUSINESS WIRE)--A.M. Best Asia-Pacific Limited has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of BNZ Life Insurance Limited (BNZLI) (New Zealand). The outlook for both ratings is stable.
The rating affirmations reflect BNZLI’s strong risk-adjusted capitalization, consistent operating performance and its affiliation with the Bank of New Zealand (BNZ).
BNZLI’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR) is expected to remain strong. Solvency capital requirements are expected to remain stable as new business strains are not expected to grow significantly. Planned profit margins have steadily increased in the five years to fiscal year 2012. Experience variations have been relatively small, reflecting the stability of the insurance portfolio. Based on its past experience and business plan projections, BNZLI’s future claims cost and lapse experience are expected to remain relatively stable.
BNZLI’s active products are mostly sold through the BNZ network, which offers lower commissions than the financial advisor channel. Since both BNZLI and BNZ belong to the National Australia Bank Limited group, A.M. Best expects that BNZLI will continue to benefit from BNZ’s established distribution capabilities and the brand recognition of BNZ.
Offsetting rating factors include BNZLI’s lower overall profitability going forward and its concentrated revenue source. BNZLI’s return on equity reduced from well over 35% to around 30% in 2012 due to the move of its general insurance referral business to another group entity. Previously, this business helped BNZLI to grow its capital without incurring additional solvency capital requirements. BNZLI’s revenue is mostly derived from its LifeCare risk product. Affordability issues and consumer preference changes could impact the company’s revenue generation. BNZLI’s manages this risk by offering optional risk benefit features, such as the newly introduced income protection, to this core product.
A.M. Best believes BNZLI is well positioned at its current rating level. Negative rating actions could occur if there is a substantial decline in BNZLI’s risk-adjusted capitalization or a significant deterioration in its operating performance.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Understanding Universal BCAR.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.