A.M. Best Affirms Ratings For Fidelity Life Assurance Company Limited

Nov 10,2006 00:00 by Business-Wire

OLDWICK, NEW JERSEY, U.S.A.--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength (FSR) rating of A- (Excellent) and the issuer credit rating (ICR) of “a-” for Fidelity Life Assurance Company Limited (Fidelity Life) (New Zealand). The outlook on both ratings is stable.

The ratings reflect Fidelity Life’s improved capitalization, good business growth, prudent dividend policy and consistent profitability.

Fidelity Life’s risk adjusted capitalization, as measured by Best’s Capital Adequacy Model, has improved over the past financial year. Good operating earnings and disciplined investing have contributed to the company’s improved capital position. A.M. Best notes that through a diversified approach to investment management, the company maintains a high quality investment portfolio and an ample liquidity position, while producing a high level of investment income. In the past two financial years, investment income has contributed significantly to the company’s earnings.

Fidelity Life has experienced strong profitability and business growth. Premiums have grown at an average annual rate of 12.3% over the past five years. The company managed a return on equity of 26% in fiscal year 2006. The five-year average growth rate in capital and surplus was 18.4%.

Fidelity Life has adopted a sound dividend policy. The company announced a once off dividend of $1.00 per share in light of extraordinary earnings in 2006. Discounting the effect of the one off special dividend, the five-year average dividend payout ratio was 5.7%. Current business growth has largely been supported by retained earnings.

Partially offsetting these positive factors are the company’s continued experience strain, uncertainties with regards to taxation reforms and increasing capitalization pressure due to strong business growth.

Ongoing competition has put pressure on Fidelity Life’s profit margins. While risk premiums have been rising steadily, experience strains have persevered. Fidelity has strengthened its assumptions on several lines to address these strains.

Strong business growth and associated acquisition costs have kept Fidelity Life in a tight solvency position. Reinsurance support has relieved solvency strain. The company’s solvency position was stable for fiscal year 2006. However, Fidelity Life’s ongoing change in business focus and reaction to competitive forces may place increasing pressure on the company’s capital requirements.

Finally, taxation reforms will have an impact on life insurance companies in general. This could result in changes to a company’s successful business model. The ratings reflect uncertainties associated with potential taxation reforms.

A.M. Best Co., established in 1899, is the world’s oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best’s Web site at www.ambest.com.

Contacts
A.M. Best Co.
Analysts:
Philip Chung, CFA, 852-2827-3419
philip.chung@ambest.com
or
Terrence Wong, 852-2827-3413
terrence.wong@ambest.com
or
Public Relations:
Jim Peavy, (1) 908 439 2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow
(1) 908 439 2200, ext. 5378
rachelle.morrow@ambest.com

____________________________________