SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) 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 assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM). In addition, the ratings factor in a neutral impact from the company’s 100% ownership by BlueInc Group Pty Limited.
AM Best expects Momentum Life’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), to remain at the strongest level over the medium term. Although planned business expansion is expected to drive increased capital requirements, AM Best expects available capital to remain sufficient to support the growth of underwriting operations over the medium term. In addition, AM Best expects that there will be no requirement for Momentum Life to upstream capital to settle an emerging contingent liability at the group level. Partially offsetting the positive balance sheet factor is Momentum Life’s small absolute capital base, which increases its sensitivity to stress 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 with a five-year average return-on-equity ratio of 9.4%. Since its inception as a capitalised insurer in 2018, Momentum Life’s earnings have been constrained by a high expense ratio, given its small premium base in its initial phase. However, the company’s operating performance has been supported by the favourable trail commission arising from insurance distribution operations prior to 2018, as well as reinsurance commission income, which have both partially offset outward acquisition costs during the company’s initial growth phase. AM Best expects the company to report positive earnings over the medium term, as it grows in scale and executes its strategic business plan.
AM Best views Momentum Life’s business profile as limited, reflecting the company’s small scale as a startup insurer and its concentration of business in New Zealand’s life insurance sector. The products offered by Momentum Life include guaranteed acceptance funeral insurance and fully underwritten term life insurance products, which have a low risk profile. Momentum Life benefits from good control over its underwriting and sales practices, with all products distributed through its wholly owned subsidiary.
AM Best views Momentum Life’s ERM as appropriate given the size and complexity of the company’s operations. The company’s risk management capabilities have developed since its inception, with compliance of regulatory and conduct risk requirements expected to remain a key priority. AM Best considers continual risk management developments as necessary to remain aligned with future changes in Momentum Life’s risk profile, as the company increases its operational scale.
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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