tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Wednesday, August 12th, 9:48PM

Insurance

rss
Latest Headlines

Rating company gives its view on Sovereign

Ratings agency AM Best explains why it has left Sovereign's financial strength rating unchanged as well as outlining its views on the company's financial position and its distribution strategy.

Tuesday, January 3rd 2017, 7:33AM

AM Best has reissued Sovereign's Financial Strength Rating at the A+ (Superior) level for the ninth consecutive year. It says the rating reflects Sovereign’s strong risk-adjusted capitalisation, good operating performance and favorable business profile.

It says that despite a high dividend payout ratio, the company’s risk-adjusted capitalisation is expected to remain supportive of the current ratings, underpinned by a relatively low premium growth rate, robust earnings derived from in-force business and stable investment returns. Sovereign’s operating performance is strong as demonstrated by a five-year average return on equity of approximately 13%.

Sovereign continues to be the largest life insurance company in New Zealand based on premium. In the 12 months to September 30 it captured market share of more than 25% of in-force risk premiums and more than 20% of new business premiums.

AM Best says Sovereign has competitive advantages in distribution, benefiting from a well-established adviser channel and an affiliated banking network through its sister company, ASB Bank.

The ratings agency says that compared to its peers (the top five life companies), Sovereign's advantage is a lower net benefit to net premium ratio, as well as lower commission and expense ratios.

"Sovereign retains a relatively sizable in-force book; thus claims experience is the main factor driving operating results. Over the past few years, net claim expenses amounted to roughly 50-55% of net premiums, which is slightly lower than the weighted average of its peers."

Sovereign's cost structure is also unique in two other areas. 

One is that the company is in a "maturing stage of the life cycle" and with its multi-channel (adviser and bank) distribution model it operates on a "slightly lower commission expense ratio" than its peers.

The second is that its size gives it a more efficient cost structure.

As normal the ratings agency lists downside risks facing the company it is reporting on.

It says offsetting rating factors include New Zealand’s highly competitive life insurance market, particularly in the adviser channel. This has resulted in some pressure on Sovereign’s level of new business volume.

Nevertheless, AM Best also notes that Sovereign has a low appetite to grow or maintain its market share at the expense of lower expected profitability.

Sovereign is well-positioned at its current ratings level. "Downward ratings pressure could result if there is significant deterioration in its risk-adjusted capitalisation or operating performance. Additionally, the ratings could be downgraded if there is material deterioration in the consolidated financial condition of Sovereign’s ultimate parent."

Sovereign chief executive, Nick Stanhope, says the announcement is good news for advisers, customers and those in the market to purchase life and health insurance.

He says New Zealanders should care about this because the financial strength rating is an assessment of its ability to meet obligations to policyholders. "In the last year, Sovereign paid out more life insurance claims than any other New Zealand insurance provider," he says in a statement.

“We are really proud of our continued A+ rating and it just goes to show you can trust us," he says.

 

Tags: Sovereign

« Kiwi company attracts $200 million global investmentPartners gets a new chairman »

Special Offers

Comments from our readers

No comments yet

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
Insurance Briefs

Insurer nib backs Ronald McDonald House with $20k investment
Health insurer nib New Zealand and its nib foundation have lent support to Ronald McDonald House Charities.

Less stressed during lockdown
New Zealander’s health and wellbeing had surprising benefits from the Covid-19 lockdown.

Southern Cross supports new safe haven for at-risk pets
Southern Cross Pet Insurance has teamed up with Pet Refuge to provide temporary shelter for animals affected by family violence.

nib Foundation supports Lifeline to the tune of $150,000
To support the growing mental health needs of Kiwis emerging from the Covid-19 pandemic, Lifeline Aotearoa has increased its service capacity thanks to a $150,000 grant from nib foundation, the charitable arm of nib New Zealand (nib).

News Bites
Latest Comments
  • It starts with governance
    “@Adviser1 this is part of the discussion we need to have as an industry. It is also part of the message we have with the...”
    10 hours ago by JPHale
  • It starts with governance
    “Thanks Gavin, appreciate your comments. So by engaging a compliance consultant and having the necessary policies, procedures...”
    12 hours ago by Adviser1
  • It starts with governance
    “Hi Adviser 1 -I don't think peer review will cut the mustard. There is more to it than someone having a look at you do and...”
    1 day ago by gavin austin adviser business compliance
  • It starts with governance
    “Who offers a governance solution for a one man adviser business or is adviser peer review the way to go? Cheers...”
    1 day ago by Adviser1
  • It starts with governance
    “Well said as usual Russell, you’re right governance is one of the things that has been missing from the discussion and...”
    2 days ago by JPHale
Subscribe Now

Cover Notes - Specific news aimed at risk advisers

Previous News
Most Commented On
About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by Web Developer and eyelovedesign.com
x