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Policyholder security weakened: S&P says

Standard & Poors says demutualisation of life companies is hurting policyholder security.

Tuesday, March 6th 2001, 6:55AM

Ratings agency Standard and Poors is warning that demutualisation of life insurance companies is starting to hurt policyholder security.

"Continuing and accelerating change ultimately is altering the risk profile of the companies who are trusted with life insurance, disability income protection and superannuation," S&P Financial Services Ratings director Natalie Wells says.

"In the struggle to optimise the position of various stakeholders, Australian life insurers increasingly are influenced by the insatiable demands of shareholders. While policyholders may benefit from product innovation, easier access, and more professional and informed sales processes, they have experienced some diminution in security as life companies seek optimal balance sheet efficiency and strive for improved performance in an increasingly challenging operating environment."

Wells says these developments have influenced the downward drift in Australasian life insurance ratings, a trend which is reflected globally.

In the past decade there have been significant falls in the insurer financial strength ratings of some major life insurers in Australia or New Zealand. For instance AMP has fallen from AAA to AA, MLC from AAA to AA and Zurich Life from AA to A+.

"Other ratings remain under pressure as reflected by their negative outlook."

Going forward S&P expects "continued mild erosion" in the financial strength of Australian and New Zealand life companies.

Those companies most likely to be affected include those who cannot achieve appropriate scale, strong market position, and supportive operating performance; and those who continue to drive capital from their balance sheets without a corresponding reduction in risk or enhancement in financial flexibility, she says.

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AMP Home Loans $200k+ 7.14 5.59 6.09 6.45
AMP Home Loans LVR <80% - - 5.75 6.09
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BNZ - Mortgage One 7.15 - - -
BNZ - Rapid Repay 6.74 - - -
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Credit Union Baywide 6.45 5.95 5.99 -
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eMortgage 6.04 6.15 6.69 7.19
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Housing NZ Corp 6.74 5.70 6.09 6.29
HSBC Premier 6.84 5.65 5.65 5.65
HSBC Premier LVR > 80% - - - -
HSBC Special - 5.29 5.29 5.29
ICBC 6.75 5.99 6.39 -
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Lender Flt 1yr 2yr 3yr
Kiwibank - Capped - - - -
Kiwibank - Offset 6.55 - - -
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SBS Bank Special - 5.59 5.19 5.49
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Silver Fern 5.95 6.10 6.55 7.05
Sovereign 6.85 5.99 6.09 6.39
Sovereign Special - 5.59 5.39 5.59
The Co-operative Bank 6.70 5.59 5.39 5.59
TSB Bank 6.74 5.70 5.70 6.00
TSB Special - - 5.35 5.60
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