A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Cigna Life Insurance New Zealand Limited (CLINZ) (New Zealand). The outlook of these Credit Ratings (ratings) remains stable.

The ratings reflect CLINZ’s strong balance sheet, positive operating results and high quality investment portfolio. Under CLINZ’s baseline projections, A.M. Best expects the company’s risk-adjusted capitalization to remain favorable in spite of planned capital repatriation and support of business growth requirements over the near term. Overall operating performance has been positive, as demonstrated by a five-year average return on net assets of more than 10% and five-year average return on premium revenue of more than 20%.

Partially offsetting rating factors are CLINZ’s deteriorating claims experience, and the strategic risks surrounding the successful development of new sales channels and product lines. In recent years, CLINZ has been diversifying beyond its core credit insurance business by developing its own direct-to-customer channel and new affinity partnerships. As a result, its claims ratio has been on an increasing trend, as the highly profitable credit insurance business has been reduced as a proportion of total business. Uncertainty prevails over the prospects of CLINZ’s new sales campaigns and the underlying profitability of its new product lines. Nevertheless, A.M. Best expects the negative impact on overall operating performance to be limited given CLINZ’s low underwriting leverage. In addition, stable investment earnings continue to be a significant contributor of overall operating results, which act as a buffer against the volatility in underwriting results.

Positive rating movements are unlikely. Significant deterioration in CLINZ’s risk-adjusted capitalization due to higher-than-expected dividend payouts or a continued trend of declining profitability could result in downward pressure on its ratings.

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