SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Momentum Life Limited (Momentum Life) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Momentum Life’s balance sheet strength, which AM Best categorizes as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM). In addition, the ratings factor in no rating lift or drag from the company’s 100% ownership by BlueInc Group Pty Limited (BlueInc Group).
As a start-up insurer that commenced risk-bearing operations in March 2018, Momentum Life has a limited track record of operation. Consequently, AM Best’s assessment of the company’s rating fundamentals is principally forward looking in nature.
AM Best expects Momentum Life’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), to remain at the strongest level over the medium term. Despite forecast underwriting growth during the company’s start-up phase driving increasing capital requirements, AM Best expects available capital to remain sufficient to offset this planned business expansion over the medium term. Partially offsetting balance sheet factors include Momentum Life’s small absolute capital base, which increases its sensitivity to stressed scenarios, as well as its high reliance on third-party reinsurance for risk transfer and upfront commission financing.
AM Best considers Momentum Life’s operating performance to be adequate, and the company is expected to record positive return-on-equity ratios over the medium term. At present, the company’s underwriting performance is hampered partially by a high expense ratio, given its small premium base as a start-up insurer. Underlying performance, however, is expected to benefit from reinsurance commission income and the favorable run-off of trail commission assets arising from insurance distribution operations prior to 2018, serving to offset outward acquisition costs partially during the company’s initial growth phase.
AM Best views Momentum Life’s business profile as limited, reflecting the company’s small scale as a start-up insurer and its concentration to New Zealand’s life insurance sector. The products offered by Momentum Life include guaranteed acceptance funeral insurance and lump-sum life insurance products, which have a low risk profile.
AM Best views Momentum Life’s ERM as appropriate given the size and complexity of the company’s operations at present. The company’s risk management capability has developed since its inception, with regulatory compliance expected to remain a key priority in the near term. As the company continues to develop and expand, AM Best expects that risk management capabilities will develop in line with increased operational scale and widening product offerings.
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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