These Credit Rating (rating) actions follow the completed acquisition of 100% ownership of Pinnacle Life on 31 March 2022, by Greenstone Holdco Pty Limited (Greenstone), an insurance distributor in Australia and New Zealand. This concludes a staged acquisition following an agreement signed in April 2020.
The ratings reflect Pinnacle Life’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM). The ratings also factor in a neutral impact from the company’s ultimate ownership by Greenstone.
The positive outlooks reflect an improving trend in Pinnacle Life’s balance sheet fundamentals, including its regulatory solvency position and financial flexibility. Pinnacle Life has experienced some volatility in its regulatory solvency in recent years, mainly due to its new business growth initiatives. AM Best views the company’s financial flexibility to have strengthened following the change of ownership. AM Best expects Greenstone to provide capital support to Pinnacle Life if required and prospective regulatory solvency to remain robust over the medium term. These factors, coupled with AM Best’s expectation of controlled growth and robust underwriting performance over the medium term, could lead to positive rating actions.
Pinnacle Life’s balance sheet strength is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which AM Best expects to remain at the strongest level over the medium term. Partially offsetting balance sheet factors include the company’s small capital base, which increases the sensitivity of capital adequacy to new business growth, changes in the interest rate environment and shock events. In addition, AM Best views the company as having a high reliance on third-party reinsurance.
AM Best views Pinnacle Life’s operating performance as adequate, with the company having generated a five-year average return-on-equity ratio of 8.1% (fiscal years 2017-2021). The company’s operating results have been driven by the favourable underwriting performance of its in-force life business, coupled with robust investment returns. Overall earnings during this period have exhibited moderate volatility, driven mainly by discount rate movements impacting reported technical results. Prospectively, AM Best expects Pinnacle Life’s operating performance to remain adequate while the company executes its plan for significant growth, underpinned by a robust pricing strategy, controlled underwriting growth and leveraging the expertise of Greenstone to manage the associated underwriting risks.
AM Best considers Pinnacle Life’s business profile as limited, largely reflecting the company’s small-scale of operations, as well as its low product and geographic diversification in New Zealand. The company 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 (GPW). Despite challenging market conditions, the company’s GPW has grown rapidly by 74.2% over three years, with prospective growth to be supported by development of a wider product offering and new distribution agreements with Greenstone.
AM Best views Pinnacle Life’s ERM as appropriate given the size and complexity of the company’s current operations. While AM Best considers Pinnacle Life’s risk management capabilities as appropriate for its key risks, it expects continual development as the company increases its scope of operations over the near term.
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 AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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