S&P rating 'positive for industry'
New Zealand’s life insurance industry should feel buoyed by the fact that Standard and Poors has assigned it a low-risk rating, AIA chief executive Wayne Besant says.
Thursday, January 30th 2014, 6:00AM
Standard and Poor’s ratings services gave a low-risk insurance industry and country risk assessment to New Zealand’s life insurance sector.
It said New Zealand was a relatively high-income economy with a stable policy environment, and low industry risk with strong returns and relatively less exposure to interest rate and longevity risk than other insurance markets.
Credit analyst Michael Vine said it was comparable to markets in France, Hong Kong, the US and UK.
He said: “We consider that New Zealand's GDP expansion will support premium growth for the country's life sector, in addition to rising demand from a higher population, existing under-insurance, and increased risk awareness post-catastrophes, although affordability remains a constraint. Returns for the industry have been particularly strong at over 17% return on equity for the past five years, although they have varied significantly between individual insurers. Recent changes in taxation regulation and competition from a range of distribution channels and new entrants have moderated life insurers' profitability, but we expect returns to stay at a still strong 15% over the next few years.”
Besant said it would give more confidence to the industry after a recent period of uncertainty. He said there was good longevity and fundamentals in the New Zealand industry. The Reserve Bank’s work on prudential supervision helped, he said.
“This gives further strength to that. I think it’s a positive for the industry. I expect it to be a good year. I think New Zealand’s going to go well, it’s an election year and we’re already seeing a few things in terms of initiatives from the Govenrment and the opposition.”
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