AM Best Affirms Credit Ratings of Pinnacle Life Limited

AM Best has affirmed the Financial Strength Rating of B (Fair)
and the Long-Term Issuer Credit Rating of “bb+” of Pinnacle Life Limited
(Pinnacle Life) (New Zealand). The outlook of these Credit Ratings
(ratings) is stable.

The ratings reflect Pinnacle Life’s balance sheet strength, which AM
Best categorizes as adequate, as well as its adequate operating
performance, limited business profile and appropriate enterprise risk
management (ERM).

Pinnacle Life’s balance sheet strength is underpinned by its
risk-adjusted capitalization, as measured by Best’s Capital Adequacy
Ratio (BCAR), which is at the strongest level. Despite this, the company
has a small absolute capital base, which increases its sensitivity to
shock events, as well as to changes in future performance and intangible
assets. AM Best also views the company as having a high reliance on
third-party reinsurance and a thin regulatory solvency margin when
compared with other New Zealand life insurers.

Pinnacle Life’s operating performance is viewed as adequate, with the
company having generated a five-year average return on equity ratio of
7.5% (fiscal years 2014-2018). Overall earnings during this period have
exhibited moderate volatility, driven mainly by discount rate movements
impacting reported technical results. Prospectively, AM Best expects
controlled underwriting growth and a robust pricing strategy to support
the maintenance of adequate operating performance over the medium term.

AM Best views Pinnacle Life’s business profile as limited. The company
is a small New Zealand life insurer, with a market share that remains
below 1% based on 2018 in-force and new business premiums. All of the
company’s business originates from New Zealand, with its underwriting
portfolio focused on mortality life products.

AM Best views Pinnacle Life’s ERM framework as developed and its
approach to managing key risks as appropriate given the size and
complexity of the company.

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

This press release relates to Credit Ratings that have been published
on AM Best’s website. For all rating information relating to the release
and pertinent disclosures, including details of the office responsible
for issuing each of the individual ratings referenced in this release,
please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media
use of Best’s Credit Ratings and AM Best press releases, please view Guide
for Media - Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.

AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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