AM Best Affirms Credit Ratings of Lifetime Income Limited

SINGAPORE–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of B- (Fair)
and the Long-Term Issuer Credit Rating of “bb-” of Lifetime Income
Limited (LIL) (New Zealand). The outlook of these Credit Ratings
(ratings) is stable.

The ratings reflect LIL’s balance sheet strength, which AM Best
categorizes as adequate, as well as its marginal operating performance,
very limited business profile and marginal enterprise risk management.

LIL’s balance sheet strength is underpinned by its risk-adjusted
capitalization, which is expected to remain at least at a strong level
over the medium-term, as measured by Best’s Capital Adequacy Ratio
(BCAR). AM Best expects prospective capital requirements arising from
planned organic and inorganic growth to be supported by intermittent
capital injections from the company’s parent; Retirement Income Group
Limited, and ultimately through frequent capital raisings from
shareholders. Offsetting balance sheet factors include LIL’s marginal
buffer in its regulatory solvency position, as well as its reliance on
dynamic hedging to support its variable annuity (VA) business.

Having commenced operations in 2015, LIL is viewed to have a limited
track record of operating performance. In addition, the company’s high
cost base relative to its revenue generation during its start-up phase
has been a key driver of overall earnings. Despite this, the company has
reported an operating profit in fiscal years 2017 and 2018. However, AM
Best notes that a portion of the costs associated with the investment
management arising from LIL’s business are borne by its sister company,
Lifetime Asset Management Limited (LAM). As a result, in assessing the
underlying performance of LIL’s portfolio of business, AM Best gives
some consideration to the combined performance of LIL and LAM, which
currently remains in a loss-making position.

LIL is a new entrant to New Zealand’s life insurance market, with a
narrow product range aimed at the retirement community. The company’s
core VA product, which includes guaranteed lifetime withdrawal benefits,
is viewed to be in an early stage of the product life cycle in New
Zealand, and inherent maturity risk arises from the lack of historical
experience for this business. Despite LIL having recently sought to
diversify its portfolio mix and grow its scale operations, through the
acquisition of an in-force portfolio of annuity and unit-linked
business, these products are closed to new policyholders, and the
transaction is viewed to introduce a level of integration and execution
risk for LIL over the near term.

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 © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

Contacts

Myles Gould
Associate Director, Analytics
+65
6303 5020

myles.gould@ambest.com

Chi
Yeung Lok

Director, Analytics
+65 6303 5016
chi-yeung.lok@ambest.com

Christopher
Sharkey

Manager, Public Relations
+1 908 439
2200, ext. 5159

christopher.sharkey@ambest.com

Jim
Peavy

Director, Public Relations
+1 908 439
2200, ext. 5644

james.peavy@ambest.com

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