SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Kiwi Insurance Limited (Kiwi Insurance) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Kiwi Insurance’s balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. In addition, the ratings factor in a neutral impact from the company’s majority ownership by New Zealand Post Limited (NZ Post), which is a state-owned enterprise in New Zealand.
Kiwi Insurance’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which remains at the strongest level. This reflects the company’s moderate underwriting leverage and conservative investment allocation. The company has a liquid investment portfolio, focused on cash and term deposits. Since early 2020, the company has invested in high-quality fixed income securities to diversify its portfolio. Over the medium term, AM Best expects full earnings retention to support the company’s growth initiatives. A partially offsetting balance sheet factor is Kiwi Insurance’s modest absolute capital base, which increases the sensitivity of capital adequacy to shock events, as well as to changes in future performance and dividend payments.
AM Best considers Kiwi Insurance’s operating performance to be adequate. Despite a moderate level of volatility during the past five years, the company achieved an average return-on-equity ratio of 12% (fiscal-years 2015-2019). Overall earnings during this period reflect a combination of favourable underwriting performance, coupled with low single-digit but stable investment returns. AM Best expects Kiwi Insurance’s operating results for fiscal-year 2020 to weaken compared with the five-year average, driven mainly by higher net claims expenses incurred during the first half of the year. Prospectively, AM Best expects a robust pricing strategy, controlled expense management and steady revenue growth to support the maintenance of adequate operating performance over the medium term.
AM Best views Kiwi Insurance’s business profile as neutral. The company is a small-sized insurer in New Zealand’s life insurance industry, with a market share of less than 1%, based on 2019 gross written premiums. Despite this, AM Best views the company’s strong affiliated distribution channels as providing a competitive advantage. The company’s parent, NZ Post, and its sister company, Kiwibank Limited (Kiwibank), have extensive nationwide branch networks that support the distribution of Kiwi Insurance’s products. In addition, as part of the NZ Post group, Kiwi Insurance benefits from cross-selling opportunities, low acquisition costs and access to shared group resources. Despite challenging market conditions, the company’s in-force book has grown steadily over the past five years, supported by new product development. Prospectively, the company’s growth strategy is expected to benefit from increased distribution through digital channels and the launch of new products offerings. Kiwi Insurance’s top line may be challenged over the medium term due to policy cancellations and weaker sales as a result of the economic downturn related to the COVID-19 pandemic, as well as the restructuring of Kiwibank and NZ Post’s physical branch network.
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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