A.M. Best Affirms Rating of Sovereign Assurance Company Limited.OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR (Free System Resource) In Windows 3.x, the amount of unused memory in various 64K blocks reserved for managing current applications. Every open window takes some space in this area. See Windows memory limitation. ) of A (Excellent) and assigned an issuer credit rating (ICR (Intelligent Character Recognition or Image Character Recognition) The machine recognition of hand-printed characters as well as machine printing that is difficult to recognize. ) of "a+" to Sovereign Assurance Company Limited (Sovereign) (Auckland, New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. ). The outlook on both ratings is positive. The ratings reflect Sovereign's leading market position in the New Zealand's life industry, favorable cost structure, continued improvement in overall profitability and support provided by the ultimate parent company, Commonwealth Bank of Australia. The ratings also recognize Sovereign's efforts in enhancing operational efficiency. Sovereign has been the market leader since its merger with Colonial Limited's operation in New Zealand, capturing about 30.7% market share in terms of in-force premiums in the life market in 2005. Sovereign's leading market position is strongly underpinned by the company's multi-channel distribution capabilities. In addition to independent and aligned financial advisers, Sovereign is able to access the retail banking branches of its affiliate, the ASB Bank ASB is one of New Zealand's largest banks, with branches throughout the country. It also has insurance and securities arms. ASB also operates BankDirect, a branchless banking service that provides service via phone, Internet, eftpos and ATMs only. . Broad distribution networks have enabled Sovereign to maintain its growth momentum, further increasing its market share in new business to approximately 31.9% in 2005. Sovereign has continued to increase its operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. , recording a 45% growth in net profits in 2005. Favorable underwriting experience and strong investment earnings contributed to the improvement in profitability. Despite high dividend payouts, the company's embedded value Embedded Value A common valuation measure used outside North America particularly in the insurance industry. It is calculated by adding the adjusted net asset value and the present value of future profits of a firm. rose by 8.0% in the past financial year. Sovereign's continued efforts to simplify and refine processes and consolidate systems and products are expected to further strengthen the company's operational efficiencies and reduce operational risks associated with legacy computer systems. Offsetting these positive factors are Sovereign's deterioration of risk-adjusted capitalization, intense market competition and limited market growth opportunities over the long term. Continued new business growth, exposure to investments in equities and high levels of dividend payouts in 2005 exacerbated Sovereign's risk-adjusted capitalization, as measured by the Best Capital Adequacy Ratio Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR)[], is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss. (BCAR BCAR Brunswick County Association of Realtors BCAR British Civil Airworthiness Requirements BCAR Bullitt County Animal Rescue (Shepherdsville, KY) BCAR Business Case Analysis Report BCAR Beaver Creek Array BCAR Buffalo Civic Auto Ramps, Inc. ), although the solvency position of the company remained adequate as of June 2005. Going forward, strengthening the company's capitalization through retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. is crucial for Sovereign's business growth in the near term. In addition to the limited potential consumer base in New Zealand, intense competition from bank-owned insurers and niche insurers could challenge Sovereign's capability to sustain its growth in new business in the country. 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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