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Partners Life annual profit down 13% as low interest rates push up actuarial costs

Monday 31st July 2017

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Partners Life, which counts US private equity firm Blackstone as a cornerstone investor, posted a 13 percent drop in annual profit as persistently low interest rates increased the life insurer's theoretical long-term liability, while its preferred underlying earnings measure was largely flat on the year. 

Net profit fell to $9.7 million in the 12 months ended March 31 from $11.1 million a year earlier, according to its annual report lodged with the Companies Office. That included an $8.5 million charge from changes to economic assumptions reducing Partners Life's discount rate, $2.6 million from investment revenue and a $3.1 million gain from the release of an options reserve that wasn't needed. 

Underlying earnings slipped to $12.5 million from $12.6 million, even as premium revenue rose 24 percent to $171.5 million, outpacing a 22 percent increase in claims to $71 million and a 7 percent gain in operating costs to $42.2 million. Customer numbers rose 15 percent to 145,000, while in-force annual premiums were up 20 percent to $207 million. 

"Our annual financial result has once again been underpinned by significant growth in our in-force book and a strong balance sheet," chief financial officer Sean Kam said in a statement. "We retained our leading new business market share position for risk business sold via independent financial advisers, and this was reflected in our premium income." 

In May last year, Partners Group Holdings, the immediate parent of Partners Life, entered into a subscription agreement with Blackstone to invest $200 million in three tranches over the next two years. Partners Life received the second tranche of $71.5 million on June 28, adding to the $68.3 million injection in September last year. 

The insurer's solvency margin rose to $73.5 million from $25.6 million a year earlier, giving it a solvency ratio of 150 percent, up from 122 percent at the end of the 20176 financial year. 

The firm was launched in 2011 by Naomi Ballantyne, who was made an Officer of the New Zealand Order of Merit in the 2016 New Year Honours. Partners Life is the third life insurer she's had a hand in founding, having been one of the initial employees of Sovereign, now owned by ASB Bank, and ClubLife, now owned by ANZ Bank New Zealand as OnePath Life. 

Partners Life paid $75.6 million in commissions to advisers, up from $70.1 million a year earlier, of which acquisition commissions were up 1.8 percent to $58.1 million and maintenance commissions climbed 31 percent to $17.5 million. 

The company said it was "well placed to continue its strong momentum into the 2018 financial year" and led the market in adviser support. 

Staff costs increased 5.2 percent to $22.3 million, while sales and marketing spending rose 16 percent to $6.6 million. 


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