How Covid-19 has impacted Partners Life

Partners Life has reported another year of positive growth and explains how Covid-19 has impacted the business.

Wednesday, August 12th 2020, 12:15PM

Partners Life’s positive momentum continues with profitable growth in both in-force and new business volumes within a challenging market.

It said the result had been achieved through Partners’ focus on best-in-class product offerings, and a unique claims philosophy focused on fair customer outcomes and efficiencies.

The emergence of Covid-19 in the final quarter was expected to provide short-term headwinds; however the business was well-positioned to take advantage of opportunities as they arose.

Managing director Naomi Ballantyne said: “While the emergence of the Covid-19 pandemic has not had a material impact on this financial year, it is expected to provide market-wide challenges in the coming year. The biggest challenge in New Zealand is now likely to be related to the economy rather than an impact on people’s health.

“We were very pleased to support our policyholders by extending our contractual premium holiday to specifically target Covid-19 related financial distress. This was one of the most generous in the market and has been of benefit to over 4,500 policy holders economically affected by the lockdown. While the full effects of the Covid-19 pandemic are still unclear, we remain committed in our support of customers, advisers and staff.

“One of the key elements of our success is the satisfaction of both advisers and staff. We measure our adviser satisfaction through the feedback we receive directly from them and through the Lewers independent survey of adviser satisfaction in the New Zealand market. We have received a 5-star rating for adviser satisfaction for the last nine surveys, including the 2019 survey.”

Underlying insurance profit of $32 million for the financial year ended March 31, 2020 was up from $16 million in the previous year. Partners Life achieved strong growth in premium revenue, up 16%. Partners Life issued a record $58 million of new business in a market where volumes continued to contract.

Partners Group Holdings Limited’s total comprehensive income lifted to $55 million from $53 million. Comprehensive income can be distorted by changes in economic conditions such as interest rates and inflation, making underlying insurance profit a better measure of the business’ performance.

Claims continued to trend higher than expectations with a claims ratio of 56.6% for the year. During the year Partners implemented product and pricing changes to ensure the sustainability of disability income products.

Partners Group Holdings Limited’s operating expenses reduced to $56 million reflecting deferral of expenditure and capex including measures taken given the uncertain economic effects of Covid-19.

Chairman Jim Minto said: “Partners Life is well placed and resourced to continue our growth momentum. The key is to ensure life insurance remains sustainable for all parties. We need to be ready to pay claims for decades to come and our management and governance will remain the very best to ensure we can deliver on these promises while continuing our growth.”

Chief financial officer Sean Kam said: “Partners Life continued its profitable growth and gains in our market share. We are well resourced to weather any headwinds from the economic environment while implementing our strategic plans.”

Premium revenue increased from $247.46 million to $286.81 million and claims increased from $128.58 million to $162.41 million.

The insurer paid $115.34 million in commission to advisers in the year and said its total acquisition costs were $122.33 million. There was $299,000 paid in net commissions to Partners Life directors, their associated entities and related parties in the year.

Loans to advisers dropped from $1.13 million last year to $372,000.

The insurer said it expected the Covid-19 pandemic to lead to a short-term increase in life, trauma and redundancy claims, a short-term extension to the duration of disability income claims, a short-term increase in policy lapse rates and a short-term decrease to premium revenues as premium holidays were taken.

“The effect of these changes in assumptions on the current year profit and solvency position have not been material. The impact on present value of future planned margins of revenue over expenses was a decrease of $13.88 million. Insurance contract assets and liabilities as reported include the projected result of these assumptions.”

Lapse rates were assumed to be higher this year than last in life, TPD and disability income covers. This year’s reporting included a 200% increase in the base assumptions for mortality and morbidity, nominal lapse rates and premium holidays.

Premium rates for non-medical policies are assumed to increase by an average of 6% in April 2020, followed by an average of 2% in July 2021, and 1% in July 2022 and 2023. This assumption has changed from the prior year where nonmedical policies were assumed to increase by an average of 4% in October 2019 followed by 1% in October 2021, 2022, and 2023.

During the year Partners released its online application and underwriting tool MUM and further improved its digital fact find and needs analysis tool Evince. These digital tools are key to the continued strategy of driving future efficiencies for both Partners Life and its advisers.

Partners Life also recently announced two appointments, welcoming a new independent director, Shelley Ruha, to the board. She has extensive governance and executive leadership experience within the financial services and technology industries. The company appointed Nadine Tereora as chief operating officer.

She has more than 20 years’ experience within the life insurance industry with expertise in leading conduct, culture, claims, underwriting and operations functions.

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