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A.M. Best Affirms Credit Ratings of Sovereign Assurance Company LimitedA.M. Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Rating of "aa-" of Sovereign Assurance Company Limited (Sovereign) (New Zealand). The outlook of these Credit Ratings (ratings) is stable. The ratings reflect Sovereign's strong risk-adjusted capitalization, good operating performance and favorable business profile. A.M. Best expects Sovereign's risk-adjusted capitalization to be maintained at a strong level. Despite a high dividend payout ratio, the company's risk-adjusted capitalization is expected to remain supportive of the current ratings, underpinned by a relatively low premium growth rate, robust earnings derived from in-force business and stable investment returns. Sovereign's operating performance is strong as demonstrated by a five-year average return on equity of approximately 13%. Sovereign continues to be the largest life insurance company in New Zealand based on premium. In addition, the company has competitive advantages in distribution, benefiting from a well-established adviser channel and an affiliated banking network through its sister company, ASB (News - Alert) Bank. Offsetting rating factors include New Zealand's highly competitive life insurance market, particularly in the adviser channel. This has resulted in some pressure on Sovereign's level of new business volme. Nevertheless, A.M. Best also notes that Sovereign has a low appetite to grow or maintain its market share at the expense of lower expected profitability. Sovereign is well-positioned at its current ratings level. Downward ratings pressure could result if there is significant deterioration in its risk-adjusted capitalization or operating performance. Additionally, the ratings could be downgraded if there is material deterioration in the consolidated financial condition of Sovereign's ultimate parent. Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication. This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2016 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.
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