AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Partners Life Limited (Partners Life) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Partners Life’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also incorporate rating enhancement from Dai-ichi Life Holdings, Inc. (Dai-ichi group) [TSE: 8750].

Partners Life’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which is expected to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best also views the insurer as having strong financial flexibility and a conservative investment strategy. A partially offsetting balance sheet strength factor is Partners Life’s reliance on third-party reinsurance for risk transfer and upfront commission financing.

AM Best assesses Partners Life’s operating performance as adequate, with a five-year average return-on-equity ratio of 6.5% (fiscal years 2019-2023). However, its reported operating earnings remain sensitive to interest rate movements in New Zealand, which have led to volatility in underwriting profits in recent years. Prospectively, the company is expected to benefit from an improved expense ratio due to increased operational scale.

Partners Life ranks among the largest life insurance companies in New Zealand. The company’s market share has increased following its acquisition of BNZ Life Insurance Limited (BNZ Life) in fiscal year 2023. Partners Life distributes its insurance policies predominantly through a large network of independent financial advisers, as well as through the referral of Bank of New Zealand customers, under an exclusive 10-year agreement with the bank as part of the BNZ Life acquisition.

The rating enhancement reflects integration with and ownership by the Dai-ichi group, one of the largest life insurance groups in Japan. In addition, AM Best expects Dai-ichi group to provide capital support to Partners Life in the event that the company is unable to maintain an appropriate level of capital adequacy. While Partners Life accounts for a small portion of Dai-ichi group’s overall revenues and earnings, Partners Life is viewed to be strategically important to the group as it expands the group’s presence, notably in New Zealand.

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

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