Insurers in big rethink

Life insurers in New Zealand are going back to fundamentals to revive their flagging fortunes, a Standard & Poor's report out yesterday said.

Kate Thomson, an S&P spokeswoman, said the outlook for the life insurance market continued to be negative.

That reflected "a small and languishing industry that exhibits low growth", she said.

This was underpinned by a low level of personal savings arising from few tax incentives and a lack of system support in New Zealand to encourage investments and savings for retirement.

"Nevertheless, the industry ... will gradually emerge from this long and difficult operating environment, and remains supported largely by rated bank and offshore parents," Thomson said.

Despite the bleak outlook for life insurers, their non-life counterparts would "maintain credit quality strength".

"The New Zealand non-life insurance industry consolidated during the last two years through mergers and acquisitions, with a high level of foreign ownership by Australian insurers."

The outlook for non-life insurers was stable and underpinned by strong financial strength of both parent and subsidiary companies.

"This strength, in turn, is supported by a relatively strong earnings profile, solid capitalisation in the absence of any major catastrophe and large insured loss, and conservative investment strategy," Thomson said.

- NZPA