by Benn Bathgate
The ratings agency said the outlook for both ratings is stable and reflects Cigna’s strong risk-adjusted capitalisation and consistent operating performance.
AM Best said Cigna’s capitalisation on a risk-adjusted basis, evaluated by its Capital Adequacy Ratio, demonstrates that it is strongly capitalised, and that a consistent stream of interest income has been the key contributor to the company’s capital growth in recent years.
“Over fiscal years 2010 and 2011, experience profits also have exceeded the planned margin for two consecutive years, reflecting the strong profitability of its book of business,” AM Best said.
“AM Best expects that Cigna’s strong capitalisation will remain through its retained earnings.”
The agency said the primary factor offsetting Cigna’s rating is the challenging operating environment for the New Zealand life insurance market, and that while Cigna continues its process of diversifying its product range, “it will take time to grow its premium revenue from other products.”
AM Best said Cigna’s rating could be upgraded or its outlook revised if it continues to grow other product lines, or there are no other material deviations from its planned earnings and capitalisation over the next few years.
“Conversely, if there were a significant deterioration in the company’s risk-adjusted capitalisation, the outlook and/or ratings could be pressured.”
Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz
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