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Rating agency AM Best has affirmed Pinnacle Life’s financial strength rating of B (Fair) and its long-term issuer credit rating of “bb+”. The outlook of these ratings is stable.
According to AM Best, the ratings reflect Pinnacle Life’s adequate balance sheet strength, its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
However, AM Best pointed out the insurer has a small absolute capital base, which increases its sensitivity to shock events, as well as to changes in future performance and intangible assets. It views the company as having a high reliance on third-party reinsurance and a thin regulatory solvency margin when compared with other New Zealand life insurers.
The rating agency also views Pinnacle Life’s business profile as limited. Conversely, it considers Pinnacle Life’s ERM framework as developed and its approach to managing key risks as appropriate.
“Pinnacle Life’s operating performance is viewed as adequate, with the company having generated a five-year average return on equity ratio of 7.5% (fiscal years 2014-2018),” AM Best said. “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,” it added.
