Fidelity Life credit rating affirmed

Thursday 19th January 2012

Fidelity Life Assurance has had it credit rating affirmed by AM Best on the back of strong capitlisation and improving profitability.

The rating agency affirmed the life insurer’s financial strength of A- (excellent) and issuer credit rating of a-, with both on stable outlooks. The rating agency city a 15 percent increase in the firm’s capital position to $129 million and strong profitability over recent years behind the affirmation.

“Consistent profitability and high earnings retention have helped the company to continuously grow its capital position in the past five years,” said Chi-Yeung Lok, association financial assistant at AM Best. “Partially offsetting these positive rating risk factors is the impact of competitive pressure on Fidelity Life and subdued economic environment on its prospective profitability.”

The rating affirmation comes after the life insurer announced a record group profit of $18.3 million for year ended June 30 2011, up 8 percent on the previous year. Total insurance revenue rose to $98.3 million from $91.5 million in 2010.

Fidelity paid a dividend of $1.70 a share, up from $1.32 in 2010. A special tax dividend of $0.30 cents a share was paid in recognition of the profit achieved, reflecting a total increase of 36 percent per share.

“Investment markets will continue to fluctuate widely with global economic certainty,” said Ian Braddock, chairman in the company’s annual report. “Fidelity KiwiSaver Scheme membership started to level off in during the second half of 2011 and this trend is likely to continue through 2012; however funds contributed continue to growth.”

In October 2010, the company told shareholders to ignore an unsolicited takeover offer from rival insurance company Tower, which offered investors $82 a share, valuing Fidelity at $118 million.

Fidelity has filed an application for a provisional license with the Reserve Bank, who is now responsible for governance of the industry. The company is working to secure its new license well before the September 2013 guideline, it said in its annual report.

The new prudential supervision regime for insurers was also one of the risks cited by AM Best as a threat to Fidelity’s rating, as was rising competition in adviser distribution channels.

(BusinessDesk)

BusinessDesk.co.nz

Comments from our readers

No comments yet