The rating affirmations reflect Pinnacle Life’s low product risk profile, direct distribution capabilities and a lapse ratio consistently below the market average.
Pinnacle Life mainly underwrites simple life insurance in the term life market segment in New Zealand, relying primarily on a direct-to-consumer channel. In addition, the company continues to maintain a steady niche in its targeted market segment.

Offsetting rating factors include Pinnacle Life’s sizable exposure to intangible assets (arising from insurance contracts) and a small tangible capital base.
While not exposed to the high upfront commissions of the adviser channel, business marketing through a direct-to-consumer channel also requires significant upfront advertising expenditures. This has led to a sizable amount of deferred acquisition costs on its balance sheet. Additionally, Pinnacle Life’s small tangible capital base has restricted the company’s ability to grow rapidly, thereby deferring it from achieving economies of scale.

A substantial improvement in Pinnacle Life’s solvency capital and financial flexibility could lead to positive rating actions. However, the ratings could be downgraded if there are large impairments in intangible assets due to higher-than-expected lapses for its in-force business or a higher drain on the solvency margin due to higher-than-budgeted operating expenses or higher-than-assumed claim frequency.

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 rating(s) that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page.

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