Fitch expects Resolution Life to make move for more 'runoffs'

Fitch expects Resolution Life to make move for more ‘runoffs’

2 May 2022

Fitch Ratings says it expects Resolution Life Australasia (RLA) to acquire more “runoff” business as a way to diversify its balance sheet, noting ongoing changes in the life sector have given rise to “potential” investment targets.

The rating agency made the predictions last week in a published commentary, where it assigned RLA with an insurer financial strength rating of A and long-term issuer default rating of A-.

“Regulatory scrutiny of the life sector in Australia and New Zealand has been high, with regulators intervening to improve sector performance and customer outcomes,” Fitch said. “Insurers, including RLA, have been redesigning and repricing their products and revisiting distribution strategies.

“We think these dynamics should provide RLA with potential acquisition targets and support its strategy.

“Fitch expects the insurer to diversify its balance sheet over the medium term through further acquisitions of runoff blocks.”

RLA, owned by global financial group Resolution Life, became a major player in the local market following its purchase of AMP’s life insurance business in 2020.

In February RLA announced a deal to acquire AIA’s Superannuation & Investments business for an undisclosed amount, describing the move as one that will “strengthen” its market presence.

RLA says the acquisition, which is subject to regulatory approvals and expected to close within 12-18 months, will bolster its position as the largest life insurer by assets in Australasia.

Fitch says the AIA deal will improve RLA’s visibility in Australia and add $8.2 billion of funds under management and administration.

“RLA should benefit from the enhanced scale of the overall portfolio, make better use of its digital investments and provide cross-selling opportunities to existing customers,” Fitch said.