AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of Co-operative Life Limited (Co-op Life) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Co-op Life’s balance sheet strength, which AM Best assesses as adequate, as well as its strong operating performance, limited business profile and appropriate enterprise risk management. In addition, the ratings factor in a neutral impact from the company’s ultimate owner, The Co-operative Bank Limited (Co-op Bank).

Co-op Life’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which was at the strongest level as of the company’s fiscal year end (31 March) 2024, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects the company’s risk-adjusted capitalisation to remain comfortably at the strongest level, supported by an appropriate retention of earnings. Another favourable balance sheet strength consideration is the company’s conservative investment strategy, which has a focus on cash and high-quality fixed-income securities. Offsetting balance sheet strength factors include the company’s small absolute capital base, which increases the sensitivity of its capital adequacy to stress scenarios, including changes in future operating performance.

The company has a track record of strong operating performance, with operating earnings consistently outperforming peers over the past five fiscal years (2020-2024). In fiscal year 2024, Co-op Life recorded a return-on-equity ratio of 16.9%. Profitability continues to be driven by Co-op Life’s favourable underwriting performance, partially due to the modest expense ratio associated with its bancassurance distribution channel. Prospectively, AM Best expects the company to maintain a robust pricing strategy for its underwriting operations, as well as continued positive investment income.

AM Best considers Co-op Life’s business profile as limited, principally reflecting the company’s small-scale of operations, as well as its limited product and geographic diversification in New Zealand. The company has a market share of less than 1% in New Zealand’s life insurance industry, based on gross premiums written, and its product offerings are composed mainly of term life and loan protection insurance products. As part of the Co-op Bank group, Co-op Life benefits from good distribution capabilities through its parent’s banking network, albeit maintaining a relatively low penetration rate among the bank’s customer base.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

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