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 New Zealand Medical Professionals Limited (NZMPL) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect NZMPL’s balance sheet strength, which A.M. Best categorizes as adequate, as well as its strong operating performance, limited business profile and marginal enterprise risk management.
NZMPL’s balance sheet strength is supported by solid risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). However, the company’s capital size is small compared with similar insurers rated by A.M. Best and it has low earnings retention. NZMPL also maintains a thin buffer above the minimum local regulatory capital requirement. In addition, the company has limited financial flexibility with no access to capital markets.
NZMPL has a track record of strong underwriting performance and stable investment income, with a five-year average operating ratio of 49%. This is driven mainly by its favorable claims experience due to the underlying product risk profile and low average claims size. The company also benefits from a competitive expense ratio by offering its products through an affiliation with the New Zealand Resident Doctors’ Association. Prospectively, A.M. Best expects the company to continue delivering stable earnings, supported by steady revenue growth, favorable claims experience and a low expense ratio in the near term.
NZMPL is a small-sized insurer in New Zealand that focuses on providing medical malpractice insurance to medical practitioners and health professionals. As a monoline insurer that operates in a niche market, the company has a limited market profile and generates a very small percentage of industry premiums. NZMPL has a low product risk profile with a small average claims size. The company’s claims consist largely of legal fees as most of the medical injuries are covered by the Accident Compensation Corporation.
NZMPL has some exposure to operational risk. The company has outsourced most of its operations to third-party service providers due to its small scale. A lack of oversight and management controls creates the major risk associated with this outsourcing. Hence, the company’s risk management capabilities are not aligned with its risk profile.
NZMPL is well-positioned for its current rating level. Negative rating actions may occur if there is significant deterioration in NZMPL’s operating results due to adverse claims experience or if capitalization erodes significantly below its target surplus capital due to factors such as higher-than-expected dividend payouts.
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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