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A.M. Best Affirms Credit Ratings of Lifetime Income Limited

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A.M. Best has affirmed the Financial Strength Rating of B- (Fair)
and the Long-Term Issuer Credit Rating of "bb-" of Lifetime Income
Limited
(LIL) (New Zealand). The outlook of these Credit Ratings
(ratings) is stable.

The ratings reflect LIL's balance sheet strength, which A.M. Best
categorizes as adequate, as well as its marginal operating performance,
very limited business profile and marginal enterprise risk management
(ERM).

Throughout its development phase, A.M. Best expects LIL to maintain a
level of on-balance-sheet capital that is sufficient to support the
projected business activities. Although the company has strengthened its
local regulatory capital position, the solvency margin in absolute
dollars remains modest relative to other life insurers rated by A.M.
Best. In addition, LIL's business plan calls for moderate reliance on
dynamic hedging in the longer term as the business continues to grow.

Similar to many other start-up operations that are yet to build a
supportive base of business, LIL's historical operating performance has
been pressured by low revenue paired with high fixed costs.
Nevertheless, A.M. Best does not expect much volatility in the company's
operating performance, as the variable annuity (VA) product it offers
has a low-risk product design and there is an appropriate hedging
strategy in place.

LIL is a newly formed insurance operation that sells a very narrow range
of life insurance products within New Zealand. While A.M. Best expects
the company's in-force portfolio to be profitable in the long run, the
current scale of business is small, which makes it relatively more
susceptible to unforeseen risks than insurers whose businesses are more
established and diversified. In addition, its core product – a VA with
guaranteed lifetime withdrawal benefits – is still at the introductory
stage of the product life cycle in New Zealand.

LIL has an adequate ERM framework given the operation's expected size
and complexity. Nevertheless, it may take time for LIL, as a start-up
life insurer, to prove that its risk management capabilities are
well-aligned with its risk profile.

Positive rating actions are possible in the long term if LIL is able to
demonstrate a track record of growth that allows it to generate
appropriate and sustainable returns. Conversely, factors that may lead
to negative rating actions include LIL's local regulatory solvency
margin falling below target due to adverse movements in interest rates
or equity markets. Additionally, LIL's ratings may experience downward
pressure if its holding company's consolidated risk-adjusted
capitalization falls short of A.M. Best's expectations.

Ratings are communicated to rated entities prior to publication.
Unless stated otherwise, the ratings were not amended subsequent to that
communication.

This press release relates to Credit Ratings that have been published
on A.M. Best's website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please see A.M. Best's
Recent
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Understanding
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
Guide
for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating
Action Press Releases
.

A.M. Best is the world's oldest and most authoritative insurance
rating and information source. For more information, visit
www.ambest.com.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its
subsidiaries. ALL RIGHTS RESERVED.

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