AM Best reveals financial strength of Fidelity Insurance

Fidelity Insurance has just earned a financial strength rating of A- (Excellent) and long-term issuer credit rating of “a-“ (Excellent) from AM Best. The outlook assigned to both ratings was stable.

The ratings reflected Fidelity’s “very strong” balance sheet, an assessment underpinned by the insurer’s risk-adjusted capitalisation, which was at the strongest level as of fiscal year end 2021.

While the company exhibited an elevated dividend payout ratio over the past five years, retained earnings remained sufficient to support new business growth and maintain robust regulatory solvency coverage.

AM Best viewed Fidelity Insurance’s operating performance as “adequate”, having reported a five-year average ROE ratio of 19.1%. Overall earnings were driven by robust underwriting performance supported by favourable claims experience and a low expense ratio.

Prospectively, AM Best expected Fidelity Insurance to exhibit a higher expense ratio as a result of increased infrastructure, staffing, and integration costs following its acquisition by Fidelity Life Assurance. Overall earnings were still expected to remain supportive of an adequate operating performance assessment.

The business profile assessment reflected Fidelity Insurance’s position as a medium-size insurer in Aotearoa’s life insurance industry, with a market share of around 6% based on in-force gross written premiums.

AM Best noted that the firm benefitted from a strong distribution network driven by its exclusive 15-year arrangement with Westpac New Zealand to distribute Fidelity Insurance’s products to its retail customers. It considered Fidelity Insurance “strategically important” to Fidelity Life Assurance for the same reason and expected the insurer to account for a significant component of consolidated premium income and earnings of its parent company in the future.