A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating (ICR) of "a-" for CIGNA Life Insurance New Zealand Limited (CIGNA Life) (New Zealand). The outlook on both ratings remains stable.
The ratings reflect the company's favorable level of risk-adjusted capitalization, continued improvement in operation profitability and conservative investment mix. The ratings also acknowledge the prominent market position within its core business lines.
CIGNA Life's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio, is strong and showing a positive trend. The company's aggregate capital and surplus levels have increased consistently in the past years, due mainly to its high retention of operating earnings. Its five-year average growth rate of capitalization stands at 10.6%.
CIGNA Life experienced a strong growth in net earnings to NZD 11.5 million (approximately USD 7.8 million) in 2005 from NZD 5.3 million (approximately USD 3.8 million) in 2004. The company has a highly liquid investment portfolio, generating a net yield of 8.8%. As of year-end 2005, cash and fixed interest securities represented approximately 95% of invested assets. This prudent investment strategy has partly sheltered the company's operating earnings from potential volatility.
The primary offsetting rating factor is the company's concentration of business in credit life insurance. Given the company's niche target market, A.M. Best believes the sustainability of CIGNA Life's business growth could be adversely affected by a downturn in the New Zealand credit market.
For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.
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