SINGAPORE--(BUSINESS WIRE)--AM 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 AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
NZMPL’s balance sheet strength is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which remains at the strongest level. In addition, the balance sheet assessment is supported by the company’s reinsurance program placed with a highly rated counterparty, which protects NZMPL against large single losses and aggregate exposure. However, an offsetting balance sheet factor is the company’s small absolute capital base, which increases the sensitivity of capital adequacy to shock events. Prospective risk-adjusted capitalisation is viewed to be dependent on NZMPL’s ability to retain earnings to support business growth, which is driven by its underwriting performance and investment income, as well as the level of future dividend distribution. AM Best also considers the company to have limited financial flexibility.
AM Best views NZMPL’s operating performance as adequate, as demonstrated by a five-year average return-on-equity ratio of 10.1 % (fiscal-years 2016-2020). NZMPL has a track record of positive earnings, driven by its sound underwriting performance and stable investment returns. Following a period of unfavourable claims experience in fiscal-years 2018 and 2019, NZMPL’s underwriting performance improved in fiscal-year 2020, as a result of remedial actions taken by management including premium rate adjustments. However, the company’s investment performance in fiscal-year 2020 was affected adversely by financial market volatility driven by the COVID-19 pandemic. Prospectively, AM Best expects the company to report positive earnings over the medium term, despite near-term challenging investment landscape.
AM Best views NZMPL’s business profile as limited. The company is a small and niche insurer in New Zealand focused on providing medical indemnity insurance to medical practitioners and health professionals. The company’s claims consist largely of legal fees, as most medical injury costs are covered by the Accident Compensation Corporation in New Zealand. As a monoline insurer that operates solely in one country, the company has limited product and geographical diversification. NZMPL’s access to new business is supported by its affiliation with the New Zealand Resident Doctors’ Association.
NZMPL’s ERM is viewed as appropriate given the size and complexity of its operations. The company has moderate exposure to operational risks, as it has outsourced most of its operations to third-party service providers. However, the company’s management has taken suitable measures to mitigate this risk including using high quality providers and contract arrangements to ensure the continuity of services.
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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