Life insurance sector profitability highlighted

Last updated 17:33 23/01/2014

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New Zealand's life insurance sector has gained a "low risk" AA rating from global ratings provider Standard & Poor's, which has highlighted the industry's profitability.

The report said the New Zealand insurance market benefited from a relatively high-income economy with stable government policy, as well as strong returns and less exposure to interest rate risks than other insurance markets.

Standard & Poor's credit analyst Michael Vine said the rating put New Zealand in line with other stable life insurance markets such as Hong Kong, France, Britain and the United States.

Standard and Poor's said the market had room to grow because of population growth, the low rate of New Zealanders with life insurance policies and "post-catastrophe" risk awareness.

The report said the cost of life insurance remained a constraint for many New Zealanders to take out a policy.

Despite that the S&P report highlighted the profitability of the life insurance industry, which it said had a 17 per cent return on equity for the past five years, although profits fluctuated between providers

It said new entrants have moderated life insurers' profits, but Vine said he expected returns to stay at a still strong 15 per cent return on equity over the next few years.

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- Fairfax Media

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