Sovereign keeps its rating

AM Best has given Sovereign afinancial strength rating of A+ (Superior) and issuer credit rating of “aa-” and the outlook for both ratings is stable.

The affirmation of the ratings reflects Sovereign’s supportive risk-based capitalisation, profitable operating performance and its leadership in the New Zealand life insurance market.

Continued profitability and higher earnings retention helped the company to increase its capital position in the year to June 30, 2011. While fiscal year 2011 after-tax profits were lower than in the prior year, higher earnings retention helped Sovereign to increase its capital position by 8.4% to $668 million. The company’s risk-adjusted capitalisation remains stable compared to the prior year and supportive of its current ratings.

Sovereign remains the market leader in the New Zealand life insurance market and has maintained a market share of around 29% to 30% of in-force premiums over the past five years. Like many of its peers, advisers are the company’s main distribution channel. Sovereign’s distribution benefits from its affiliation with ASB Bank.
Partially offsetting these positive factors are challenges in new business generation, lower new business profitability and uncertainty in its potential capital position in relation to new solvency standards for life insurers in New Zealand.\