SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb+” of Pinnacle Life Limited (Pinnacle Life) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Pinnacle Life’s balance sheet strength, which AM Best categorizes as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
Pinnacle Life’s balance sheet strength is underpinned by its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which AM Best expects to remain at the strongest level. Despite this, the company has a small absolute capital base, which increases its sensitivity to shock events, as well as to changes in future performance and intangible assets. Pinnacle Life has experienced some volatility in its regulatory solvency over recent years; however, AM Best expects prospective regulatory solvency to remain robust over the medium term, albeit sensitive to new business growth initiatives and to changes in the interest rate environment. In addition, AM Best views the company as having a high reliance on third-party reinsurance.
AM Best views Pinnacle Life’s operating performance as adequate, with the company having generated a five-year average return-on-equity ratio of 11.3% (fiscal-years 2015-2019). The company’s operating results have been driven by the favorable underwriting performance of its in-force life business, coupled with solid investment returns. Overall earnings during this period have exhibited moderate volatility, driven mainly by discount rate movements impacting reported technical results. Prospectively, AM Best expects controlled underwriting growth and a robust pricing strategy to support the maintenance of adequate operating performance over the medium term.
Pinnacle Life is focused mainly on term life insurance and funeral insurance in New Zealand. The company’s limited business profile assessment is largely a result of its small-scale operations, as well as limited product and geographical diversification in New Zealand. The company has a domestic life insurance market share of less than 1%, based on 2019 gross written premiums. Despite challenging market conditions, the company’s in-force book has grown steadily in recent years, with prospective growth expected to be supported by development of a wider product offering and new distribution agreements with a strategic partner.
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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