SINGAPORE--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of The Education Benevolent Society Incorporated (EBS) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect EBS’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management.
EBS’s balance sheet strength is supported by risk-adjusted capitalization that is maintained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company has relatively low underwriting leverage and favorable balance sheet liquidity. However, its regulatory solvency margin is modest compared with other New Zealand health insurers.
EBS’ operating performance is adequate, but has been very sensitive to one-off expenses due to its small scale. Prospectively, A.M. Best expects the company to continue delivering neutral overall earnings with moderate volatility, supported by steady revenue growth, adequate product pricing and investment income.
EBS is a non-profit organization that provides medical insurance exclusively to the members and employees of the six educational unions that own the company. The company is a small-sized insurer in the New Zealand health insurance industry, with a market share of less than 0.4% based on in-force premiums. Although the membership has increased recently due to the development of new products, EBS’s competitive market position is still considered weak in its niche educational union sector.
EBS has a developed risk management program in place that is based on its current size and complexity. The company has demonstrated an overall adequate ability to address most of its risks, primarily through adequate pricing and by holding highly liquid assets in its investment portfolio. However, the company has some exposure to key person risk and relies heavily on its third-party distribution channel.
EBS is well-positioned for its current rating level. Negative rating actions may occur if there is significant deterioration in EBS’s operating results, or if its competitive market position in its niche education union sector is weakened.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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