SINGAPORE--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A+ (Superior) and the issuer credit rating of “aa-” of Sovereign Assurance Company Limited (Sovereign) (New Zealand). The outlook for both ratings is stable.
The affirmations reflect Sovereign’s strong business profile, supportive risk-adjusted capitalization and financial flexibility as part of the Commonwealth Bank of Australia (CBA) group.
Sovereign continues to be a market leader in the New Zealand life insurance market, as measured by premium revenue. The company has a competitive advantage in its diversified distribution capabilities, benefitting from both the advisers and bancassurance channels that are part of its close affiliation with the ASB Bank, which provides Sovereign with strong brand recognition and access to its nationwide distribution network.
Risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains supportive of Sovereign’s ratings as historical operating performance continues to be consistently positive. While the company repatriates high levels of dividends to its parent, it also benefits from the financial flexibility and strong risk management capabilities as a subsidiary of the CBA Group.
Offsetting rating factors include the highly competitive environment of the New Zealand life insurance market—particularly in the adviser channel—which is likely to continue to put pressure on Sovereign’s new business market share and profitability, as well as the potential adverse impact on the persistency experience of in-force business.
Sovereign is well-positioned at its current rating level. Downward pressure on the ratings could result if there is a major operating loss and the company fails to take corrective actions in accordance to its capital management policy. Additionally, the ratings could be downgraded if there is a material deterioration of CBA’s financial condition.
The methodology used in determining these interactive 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. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
• Evaluating Non-Insurance Ultimate Parents
• Risk Management and the Rating Process for Insurance Companies
• Understanding Universal BCAR
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to rating(s) 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 visit A.M. Best’s Ratings & Criteria Center.
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