SINGAPORE--(BUSINESS WIRE)--A.M. Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” of Partners Life Limited (Partners Life) (New Zealand).
The Credit Ratings (ratings) reflect Partners Life’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
A.M. Best assesses Partners Life’s balance sheet strength as very strong. As a relatively young life insurer that continues to grow rapidly through the financial adviser channel, the capital required for writing new business still significantly exceeds the cash flows generated out of its in-force business, which gives rise to short-term funding risk. However, this risk is mitigated partially by the company now holding a significant level of solvency margin and a further capital commitment from its largest shareholder (the Blackstone Group) until fiscal-year 2019, as well as a secured multiyear financing treaty with reinsurers until fiscal-year 2022.
While the size of Partners Life’s in-force portfolio has continued to grow rapidly, claims experiences have remained broadly in line with the company’s expectation and recent results have seen a continuous reduction in its operating expenses ratio. Furthermore, starting April 1, 2018, Partners Life will enter into a new reinsurance contract that is expected to result in a positive impact on the financing of its future new business. A.M. Best thus believes Partners Life not only will continue to generate positive earnings, but also gradually improve its operating cash flows over time.
Established in August 2010, Partners Life is a direct insurer that operates in New Zealand’s life insurance industry. Currently, the company only offers protection-type products in New Zealand, including life insurance, income protection, medical insurance, disability insurance, trauma cover and business risk protection. A high percentage of new business is generated through several large dealer groups. Although the degree of reliance on these large dealer groups has steadily reduced year on year, A.M. Best remains cautious about the company’s business profile, as Partner Life is a young life insurer that has grown rapidly with some concentration in its distribution sources.
A.M. Best views Partners Life’s ERM to be appropriate, based on its current size and risk profile. Given its plan to pursue rapid growth in the life insurance space through the independent financial adviser channel, the company’s risk profile shows moderate exposure to strategic risk and distribution concentration risk. Nevertheless, Partners Life’s risk management capabilities are considered to be aligned appropriately with its risk profile. This is supported by the company’s low product and investment risk profile, conservative reinsurance arrangements, and various strategic initiatives to develop and maintain its relationship with the large dealer groups and individual financial advisers.
The outlook revisions to positive indicate that possible rating upgrades could occur if Partners Life continues to perform in line with A.M. Best’s expectations, which include sustained profitable growth, as well as growth in premium revenue at a slower rate over time as the business continues to mature. Conversely, the ratings could be downgraded if experience variations lead to a large impairment in net insurance contract assets. Additionally, the ratings may face pressure if Partners Life fails to generate capital on a timely basis to support its operating plan.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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