AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) 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 assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM). The ratings also factor in a neutral impact from the company’s ultimate parent, Greenstone Holdco Pty Limited (Greenstone).

Pinnacle Life’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which was at the strongest level at fiscal year-end 2023, as measured by Best’s Capital Adequacy Ratio (BCAR), and is expected to remain at that level. The company’s balance sheet strength assessment also reflects its robust regulatory solvency and the financial flexibility supported by its parent, Greenstone. The balance sheet strength assessment also has factored in the company’s high reliance on third-party reinsurance and small capital base, which increase the sensitivity of capital adequacy to new business growth, changes in the interest rate environment, and shock events.

AM Best assesses Pinnacle Life’s operating performance as adequate, with a five-year average return-on-equity ratio of 5.3% (fiscal years 2019-2023). The company’s operating result has been driven by the adequate underwriting performance of its in-force life business, coupled with investment returns. Overall earnings over the past five years have exhibited moderate volatility, mainly due to interest rate movements. Prospectively, operating performance is expected to remain adequate while the company executes its growth plan, supported by robust underwriting growth and an appropriate pricing strategy over the medium term, while leveraging the expertise of Greenstone to manage the associated underwriting risks.

AM Best assesses Pinnacle Life’s business profile as limited, largely reflecting the company’s small scale of operations and its low product and geographic diversification in New Zealand. Key product offering focused on mortality products, including yearly renewable term life and funeral insurance. Greenstone has become a key distribution partner and growth driver of Pinnacle Life. The remaining business was written by Pinnacle Life’s direct channel, in which 90% was sold through online channels in fiscal year 2023.

AM Best assesses Pinnacle Life’s ERM as appropriate given the size and complexity of the company’s current operations. The significant business growth is expected to introduce additional risks to the company’s operations, though this will be mitigated partially by leveraging Greenstone’s expertise in product development and underwriting. While AM Best considers Pinnacle Life’s risk management capabilities as appropriate for its key risks, continual development is expected as the company expands its scope of operations.

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

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