AM Best Affirms Credit Ratings of Lifetime Income Limited

December 7, 2018

SINGAPORE--(BUSINESS WIRE)--Dec 7, 2018--AM 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 AM Best categorizes as adequate, as well as its marginal operating performance, very limited business profile and marginal enterprise risk management.

LIL’s balance sheet strength is underpinned by its risk-adjusted capitalization, which is expected to remain at least at a strong level over the medium-term, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects prospective capital requirements arising from planned organic and inorganic growth to be supported by intermittent capital injections from the company’s parent; Retirement Income Group Limited, and ultimately through frequent capital raisings from shareholders. Offsetting balance sheet factors include LIL’s marginal buffer in its regulatory solvency position, as well as its reliance on dynamic hedging to support its variable annuity (VA) business.

Having commenced operations in 2015, LIL is viewed to have a limited track record of operating performance. In addition, the company’s high cost base relative to its revenue generation during its start-up phase has been a key driver of overall earnings. Despite this, the company has reported an operating profit in fiscal years 2017 and 2018. However, AM Best notes that a portion of the costs associated with the investment management arising from LIL’s business are borne by its sister company, Lifetime Asset Management Limited (LAM). As a result, in assessing the underlying performance of LIL’s portfolio of business, AM Best gives some consideration to the combined performance of LIL and LAM, which currently remains in a loss-making position.

LIL is a new entrant to New Zealand’s life insurance market, with a narrow product range aimed at the retirement community. The company’s core VA product, which includes guaranteed lifetime withdrawal benefits, is viewed to be in an early stage of the product life cycle in New Zealand, and inherent maturity risk arises from the lack of historical experience for this business. Despite LIL having recently sought to diversify its portfolio mix and grow its scale operations, through the acquisition of an in-force portfolio of annuity and unit-linked business, these products are closed to new policyholders, and the transaction is viewed to introduce a level of integration and execution risk for LIL 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 web page. For additional information regarding the use and limitations of Credit Rating opinions, please view . For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view .

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit for more information.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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PUB: 12/07/2018 10:41 AM/DISC: 12/07/2018 10:41 AM


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