A.M. Best Affirms Credit Ratings of Lifetime Income Limited

SINGAPORE--()--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 mainly reflect LIL’s adequate risk-adjusted capitalization and sound operating controls. The ratings also incorporate the fact that the company is a start-up venture with a limited track record of operating performance.

A.M. Best expects LIL’s risk-adjusted capitalization, as evaluated by Best’s Capital Adequacy Ratio (BCAR), to be maintained at a level that fully supports the current ratings throughout its first five years of operation. Despite the company’s aggressive growth targets, its risk-adjusted capitalization is expected to remain supportive of the ratings, principally through applying hedging techniques that are assumed to be highly effective at mitigating the exposure introduced by embedded guarantees.

While LIL is a newly formed company, it has a comprehensive set of operating controls in place. These include a process to monitor material financial risks such as profit or loss, pricing and hedging costs, on a minimum monthly basis. In addition, valuations of policy liabilities are carried out by an external appointed actuary, whereas regulatory capital requirements will be determined by another independent actuary.

The major offsetting factor in LIL’s rating assessment is the company’s relatively small in-force portfolio.

Similar to other start-up ventures, there will be some initial drain on capital due to the slow emergence of profits. This is due principally to the small revenue base over which LIL can spread operating and other expenditures.

Positive rating actions in the longer term are possible if LIL is able to demonstrate a track record of growth that will allow 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 and 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.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2016 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Jason Shum, +65 6589 8400, ext. 217
Senior Financial Analyst
jason.shum@ambest.com
or
Moungmo Lee, +65 6589 8400, ext. 210
Managing Director, Analytics
moungmo.lee@ambest.com
or
Christopher Sharkey, +1 908 439 2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1 908 439 2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best
Jason Shum, +65 6589 8400, ext. 217
Senior Financial Analyst
jason.shum@ambest.com
or
Moungmo Lee, +65 6589 8400, ext. 210
Managing Director, Analytics
moungmo.lee@ambest.com
or
Christopher Sharkey, +1 908 439 2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1 908 439 2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com