Foundation Life (New Zealand) (FLNZ) may encounter financial strains from upcoming project expenditures, potentially impacting its profitability. Despite this, AM Best anticipates that the insurer’s operating performance will remain stable in the near to medium term.
Over the past two years, FLNZ has demonstrated improvement in its operational performance. However, its expense ratio remains elevated due to costs associated with Project Scholar, a major restructuring effort aimed at its life insurance portfolio. This high expense ratio is compounded by diminished economies of scale, a consequence of the company’s contracting run-off business.
FLNZ’s business profile is viewed as constrained, given its status as a run-off life insurer with a relatively modest operational scale within New Zealand.
Since 2018, FLNZ has been implementing Project Scholar, which offers policyholders options including a cash buyout, replacement coverage with another New Zealand insurer, or a combination of these. The project has experienced delays due to fluctuating market conditions and the impacts of the COVID-19 pandemic. As of August, the scheme remains under review, awaiting regulatory, legal, and policyholder approvals. Should the project proceed as planned, AM Best forecasts that FLNZ may eventually discontinue its insurance operations.
