SINGAPORE--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Police Health Plan Limited (PHP) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect PHP’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
PHP’s balance sheet strength is supported by its solid risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The company has moderate underwriting leverage and a favorable liquidity position. However, its capital size is modest compared with similar insurers rated by A.M. Best. PHP has a track record of favorable underwriting performance and stable investment income, with a five-year average operating ratio of 92%. The company has a highly efficient cost structure, benefiting from low distribution expenses and shared overhead costs with its group. This expense advantage has enabled the company to offer its members more competitive health coverage and premiums.
As a strongly capitalized non-profit insurer, PHP has been targeting a break-even position on operating costs, and its profit margins have declined in recent years as planned. In addition, management has budgeted a high claims ratio for upcoming years. However, A.M. Best expects that PHP would be able to respond quickly to any unanticipated deterioration in results, as it has done previously.
As a niche insurer, PHP provides medical insurance exclusively to police employees and their families and as a result, has a market share of less than 3% based on in-force premiums. However, it has a high penetration rate within the police force and distributes its product through its group network. PHP’s close integration with the New Zealand Police Association has enabled the company to gain synergies and operating efficiency.
PHP has a developed risk management program based on its current size and complexity. The company has demonstrated an overall satisfactory ability to address most of its risks, primarily through its ability to adjust premium rates quickly, prudent claims management and holding liquid assets in its investment portfolio. Therefore, A.M. Best considers PHP’s risk management capabilities to be aligned appropriately with its risk profile.
PHP is well-positioned for its current rating level. Negative rating actions may occur if inadequate pricing leads to a major underwriting deficit or if capitalization erodes significantly below its target surplus capital.
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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