Many factors affect the low numbers of insured among Generation Y.
A.M. Best Asia-Pacific Limited has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of Fidelity Life Assurance Company Limited (Fidelity Life) (New Zealand).
The outlook for both ratings is stable.
The rating affirmations reflect Fidelity Life's strong risk- adjusted capitalization, profitable operation and high earnings retention.
Fidelity Life is adequately capitalized, as indicated by Best's Capital Adequacy Ratio (BCAR), which evaluates a company's risk- based capital. The company also has maintained a track record of consistent profitability. In addition, most of Fidelity Life's profits have been retained to support its business. From 2008 to 2012, total equity increased from NZD 88 million to NZD 140 million.
Although Fidelity Life's BCAR is projected to decline as a result of new business strain, management will closely monitor its new business growth to maintain an adequate buffer above the minimum solvency requirements. A.M. Best expects that Fidelity Life's capitalization will remain favorable to support its ongoing financial and operating risks.
Partially offsetting these positive rating factors is the impact of competitive pressures on Fidelity Life.
Competition remains intense in the independent adviser channel, which is the company's primary distribution channel. Competitive pressures may result in a higher lapse than expected and/or smaller premium increases than anticipated.
Fidelity Life's ratings could be upgraded and/or its outlook revised positively over the next few years if it can improve its mortality, morbidity, lapse and expense experience and if there are no material deviations from its projected solvency margin. Conversely, if the solvency margin falls significantly short of central projections, the outlook and/or ratings could be pressured.
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