SINGAPORE--(BUSINESS WIRE)--A.M. Best has upgraded the financial strength rating to A- (Excellent) from B++ (Good) and the issuer credit rating to “a-” from “bbb+” of Police Health Plan Limited (PHP) (New Zealand). The outlook for each rating is stable.
This ratings upgrade reflects PHP’s very strong risk-based capitalization and excellent performance track record over a five-year period. In addition, the ratings reflect the company’s affiliation with its ultimate parent, New Zealand Police Association (NZPA), which includes the synergies and operating efficiencies that PHP enjoys as a member of this group.
PHP’s risk-based capitalization is very strong, underpinned by a low product risk profile and a highly liquid asset structure. The company also has an excellent performance track record, with combined ratios consistently below 95% over a five-year period. Furthermore, PHP has a highly efficient cost structure, benefiting from shared overhead costs with NZPA and its subsidiaries, as well as distributing its health covers through the group’s network. This expense advantage has enabled the company to offer more competitive health covers and premiums for its members.
These positive rating factors are somewhat offset by the high claims ratios budgeted for the coming years.
As a strongly capitalized not-for-profit insurer, PHP has started to keep premium rates constant but increased the level of benefits provided. This has led to very thin profit margins, leaving the company with less of a cushion to absorb unexpected losses arising from adverse scenarios, such as worse-than-expected claims experience. However, A.M. Best expects that PHP would be able to quickly replenish capital following an unanticipated loss, principally by adjusting the fortnightly premiums of its health plans.
While positive rating actions are unlikely, negative rating actions may occur if inadequate pricing or inadequate controls lead to a major underwriting deficit.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.
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