Foundation Life NZ nears end of insurance journey

Foundation Life NZ nears end of insurance journey | Insurance Business New Zealand

Insurance News

Foundation Life NZ nears end of insurance journey

Restructuring moves toward completion with AM Best’s strong ratings

Insurance News

By
Mav Rodriguez

Foundation Life (NZ) Limited (FLNZ) is poised to exit the insurance market, as the company nears the completion of its restructuring efforts, according to a recent update from AM Best.

The global credit rating agency has affirmed FLNZ’s Financial Strength Rating at A- (Excellent) and its Long-Term Issuer Credit Rating at “a-” (Excellent), both with a stable outlook.

These ratings highlight FLNZ’s strong financial health, backed by solid capital reserves that comfortably exceed regulatory requirements. As a company gradually winding down its insurance activities, FLNZ has managed its assets and liabilities carefully to protect against market changes, particularly in interest rates.

However, FLNZ’s smaller capital base could make it vulnerable during financial stress. The company’s parent, Foundation Life (NZ) Holdings Limited (FLNZH), also factors into the overall assessment, with AM Best noting FLNZH’s considerable debt. Despite this, the company has taken steps to align the interests of stakeholders, including deferring debt payments to maintain FLNZ’s financial strength.

In terms of operations, FLNZ has shown adequate performance with improvements over the past two years. Still, the company has faced increased costs, especially related to Project Scholar, an initiative aimed at restructuring its remaining insurance policies.

As the business winds down, these costs have impacted efficiencies. AM Best expects FLNZ to maintain stable performance in the near term, though ongoing project expenses could affect profits.

FLNZ’s business operations are currently limited. Since 2018, the company has been working on Project Scholar, which offers policyholders options like a cash buyout or coverage with another New Zealand insurer. The project has encountered delays due to changing market conditions and disruptions from the COVID-19 pandemic.

As of August 2024, the proposed restructuring is still awaiting final approvals from regulators, legal authorities, and policyholders. If these are granted, FLNZ is expected to cease its insurance operations, marking the end of its presence in the industry.