SINGAPORE--(BUSINESS WIRE)--A.M. Best has removed from under review with positive implications and upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bb+” from “bb” and affirmed the Financial Strength Rating of B (Fair) of Quest Insurance Group Limited (Quest) (New Zealand). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings were placed under review with positive implications on Oct. 13, 2017, following the release of the updated Best’s Credit Rating Methodology (BCRM). These rating actions follow the completion of A.M. Best’s analysis of Quest under the updated BCRM.
The ratings reflect Quest’s balance sheet strength, which A.M. Best categorizes as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The Long-Term ICR upgrade reflects Quest’s very strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by positive operating results and growth in its absolute capital base. A.M. Best expects the company’s prospective BCAR score, despite a decreasing trend, to remain supportive of its near-term growth targets. Conversely, the assessment of Quest’s balance sheet strength is weighed down by A.M. Best’s view of the overall financial standing of Quest’s parent company, Geneva Finance Limited (GFL), which is expected to provide limited financial flexibility to Quest.
Other offsetting rating factors include the company’s limited market presence and weak underwriting performance. Historically, Quest has focused only on providing short-term loan protection and motor vehicle insurance products to GFL’s loan customers. This quasi-captive model has restricted Quest’s premium volume and growth, and is dependent on GFL’s volume of new lending. Consequently, this has resulted in an extremely limited market presence and unfavorable underwriting performance, stemming from a high expense ratio and a lack of economies of scale. While overall operating results have been consistently positive, these results have been driven primarily by investment earnings.
Since April 2017, however, Quest has entered into an underwriting agreement with Janssen’s Insurance, which allows Quest to distribute products beyond GFL’s loan customers. The volume of policies sold is anticipated to triple in the first year of operation, and A.M. Best expects prospective underwriting performance to improve.
Quest is well-positioned at its current rating level. Negative rating actions could occur if there is significant deterioration in the company’s risk-adjusted capitalization or underwriting performance. In addition, the ratings may experience downward pressure should there be a material decline in GFNZ’s overall financial strength.
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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