Rating company gives its view on Sovereign

AM Best has reissued Sovereign's Financial Strength Rating at the A+ (Superior) level for the ninth consecutive year. It says the rating reflects Sovereign’s strong risk-adjusted capitalisation, good operating performance and favorable business profile.

It says that despite a high dividend payout ratio, the company’s risk-adjusted capitalisation is expected to remain supportive of the current ratings, underpinned by a relatively low premium growth rate, robust earnings derived from in-force business and stable investment returns. Sovereign’s operating performance is strong as demonstrated by a five-year average return on equity of approximately 13%.

Sovereign continues to be the largest life insurance company in New Zealand based on premium. In the 12 months to September 30 it captured market share of more than 25% of in-force risk premiums and more than 20% of new business premiums.

AM Best says Sovereign has competitive advantages in distribution, benefiting from a well-established adviser channel and an affiliated banking network through its sister company, ASB Bank.