A.M. Best Affirms Ratings of Sovereign Assurance Company Limited

SINGAPORE--(BUSINESS WIRE)-- A.M. Best has affirmed the financial strength rating of A+ (Superior) and the issuer credit rating of “aa-” of Sovereign Assurance Company Limited (Sovereign) (New Zealand). The outlook for both ratings is stable.

The affirmations reflect Sovereign’s supportive risk-adjusted capitalization, strong operating performance and solid business profile.

A.M. Best expects Sovereign’s risk-adjusted capitalization to be maintained at a favorable level. Despite a high dividend payout ratio, the company’s risk-adjusted capitalization is expected to continually 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 around 13%.

Sovereign continues to be the largest life insurance operation in New Zealand, as measured by premium revenue. In addition, the company has some competitive advantages in distribution, benefiting from both the well-established adviser channel and an affiliated banking network through its sister company, ASB Bank.

Offsetting rating factors include the highly competitive environment of the New Zealand life insurance market—particularly in the adviser channel—which is likely to continue to put pressure on Sovereign’s new business market share and profitability.

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

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

This press release relates to rating(s) 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 visit A.M. Best’s Ratings & Criteria Center.

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

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151216006113/en/

A.M. Best
Jason Shum, +65-6589-8400 Ext. 217
Financial Analyst
[email protected]
or
Christopher Sharkey, +(1) 908-439-2200, ext. 5159
Manager, Public Relations
[email protected]
or
Chi-Yeung Lok, +65-6589-8400 Ext. 211
Senior Financial Analyst
[email protected]
or
Jim Peavy, +(1) 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best

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