AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of a of BNZ Life Insurance Limited (BNZ Life) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect BNZ Lifes balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM). In addition, the ratings factor in a neutral impact from the companys ultimate ownership by National Australia Bank Limited (NAB).
BNZ Lifes balance sheet strength is underpinned by its risk-adjusted capitalization, as measured by Bests Capital Adequacy Ratio (BCAR), which is at the strongest level. While the company has exhibited a high dividend payout ratio over the past five years, earnings retention remained sufficient to support new business growth and maintain the strongest level of risk-adjusted capitalization. A partially offsetting balance sheet factor is the companys modest absolute capital base, which AM Best views as a factor that increases its sensitivity to shock events, as well as to changes in future performance and dividend payments.
AM Best views BNZ Lifes operating performance as strong, with the company having generated a five-year average return on equity ratio of 30% (fiscal years 2014-2018). The company has a track record of favorable earnings driven by the strong underwriting performance of its in-force life business, coupled with stable investment returns. Prospectively, AM Best expects a robust pricing strategy and steady revenue growth to support the maintenance of the strong operating performance.
AM Best views BNZ Lifes business profile as neutral. The company is a small to medium-sized insurer in New Zealands life insurance industry, with a market share of approximately 5% based on 2018 gross written premiums. BNZ Life benefits from a strong distribution network driven by the bancassurance channel with an affiliated company, Bank of New Zealand Limited (BNZ), which also is owned ultimately by NAB. BNZs banking network, which includes branches nationwide, as well as the low distribution costs associated with the distribution channel, provide BNZ Life a key competitive advantage.
BNZ Lifes ERM is viewed as appropriate given the size and complexity of its operations. The company also benefits from a level of risk management oversight and governance from the NAB group.
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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Sin Yee Chuah
Associate Financial Analyst
Associate Director, Analytics
Manager, Public Relations
908 439 2200, ext. 5159
Director, Public Relations
439 2200, ext. 5644