AM Best, a global credit rating agency, has upgraded the financial strength and long-term issuer credit ratings of Pinnacle Life Limited from fair to good.
The ratings reflect Pinnacle Life's balance sheet strength, adequate operating performance, limited business profile, and appropriate enterprise risk management.
Pinnacle Life is a New Zealand-based insurance provider with a domestic life insurance market share of approximately 1%.
Pinnacle Life's balance sheet fundamentals have improved, following Greenstone Holdco Pty Limited's complete acquisition of the company.
AM Best expects Greenstone to provide capital support to Pinnacle Life if required. Pinnacle Life's regulatory solvency position has also improved gradually in recent years.
The company's risk-adjusted capitalization is expected to remain at the strongest level. However, Pinnacle Life's high reliance on third-party reinsurance and small capital base partially offset the balance sheet factors.
Pinnacle Life's operating performance is deemed adequate by AM Best, with the company generating a five-year average return-on-equity ratio of 7.7%. The company's operating results are mainly driven by the favorable underwriting performance of its in-force business.
Prospectively, Pinnacle Life's operating performance is expected to remain adequate as the company executes its business plan, underpinned by a robust pricing strategy, controlled premium growth, and leveraging the expertise of Greenstone to manage the associated underwriting risks.
The credit rating agency views Pinnacle Life's business profile to be limited, reflecting the company's small scale of operations and low product and geographic diversification in New Zealand.
However, Pinnacle Life grew its market share in terms of new business, taking up approximately 7% of the market in 2022. Prospective growth is expected to be supported by the development of a wider offering and new distribution agreements with Greenstone.
AM Best considers Pinnacle Life's enterprise risk management as appropriate, given the size and complexity of the company's current operations.
While AM Best deems the company's risk management capabilities as appropriate for its key risks, continual development is expected as the company increases its scope of operations over the near term.
The outlook of these ratings has been revised to stable from positive. The stable outlook reflects AM Best's expectation that Pinnacle Life's balance sheet strength will continue to improve over the medium term, supported by the company's gradually increasing regulatory solvency position, stable operating performance, and capital support from Greenstone.
