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 Beneficial Insurance Limited (BIL) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect BIL’s balance sheet strength, which A.M. Best categorizes as adequate, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
BIL’s balance sheet strength is underpinned by its risk-adjusted capitalization, which is currently at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Over the medium term, A.M. Best expects the company’s planned high level of underwriting growth to drive a notable increase in net required capital; however, strong internal capital generation is expected to enable it to maintain at least very strong risk-adjusted capitalization. Offsetting balance sheet factors include the company’s small absolute capital base, which increases its sensitivity to shock events and adverse changes in prospective performance, growth or dividend payouts.
BIL has a track record of strong operating performance, with the company having reported a five-year average return on equity of 18% (fiscal years 2014-2018). Profitability over this period has been driven by underwriting operations and a good five-year average combined ratio of 90%. Prospectively, A.M. Best expects strong underwriting performance to be supported by continued low loss ratios and from a gradually improving expense ratio, as the company benefits from economies of scale as it executes planned business growth.
A.M. Best views BIL’s business profile as limited given its small scale of operations. In addition, the company has limited product and geographic diversification in New Zealand. The company’s largest line of business is pet insurance, which currently accounts for more than 90% of gross written premiums. Other lines of business, including motor breakdown insurance and consumer credit insurance, are projected to grow in significance over the long term but presently remain a small component of the company’s portfolio.
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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