AM Best has revised the outlooks on Pinnacle Life’s ratings from stable to positive while affirming the insurer’s financial strength of B (Fair) and long-term issuer credit rating of “bb+” (Fair).
The rating agency’s actions came in the wake of the completed acquisition of 100% ownership of Pinnacle Life on 31 March by Greenstone Holdco, an insurance distributor based in Australia and New Zealand.
The improved outlooks reflected an upward trend in Pinnacle Life’s balance-sheet fundamentals, including its regulatory solvency – which experienced some volatility in recent years due to new business growth initiatives – and a strengthened financial flexibility following the change of ownership.
AM Best expected Greenstone to provide capital support to Pinnacle Life and prospective regulatory solvency to remain robust over the medium term. These factors, coupled with the rating agency’s expectation of controlled growth and robust underwriting performance, could lead to further positive rating actions.
Pinnacle Life’s balance-sheet strength was assessed as adequate, offset by the company’s small capital base, which increased sensitivity to new business growth, changes in the interest rate environment, and “shock events”. Additionally, AM Best viewed Pinnacle Life as having a high reliance on third-party reinsurance.
The company generated a five-year average ROE ratio of 8.1%. Its operating results – which AM Best also judged adequate – were driven by the favourable underwriting performance of its in-force life business.
AM Best viewed Pinnacle Life’s business profile as limited, reflecting the company’s small-scale operations and low product and geographic diversification in Aotearoa. It also found Pinnacle Life’s ERM evaluation appropriate given its size and complexity. Pinnacle Life is focused mainly on term life and funeral insurance and has a domestic life insurance market share of approximately 1% based on 2021 gross premiums written. Despite challenging market conditions, the company’s GPW grew by 74.2% over three years.
Prospectively, AM Best expects continual development as the company increases its scope of operations over the near term.
