AM Best Affirms Credit Ratings of New Zealand Medical Indemnity Insurance Limited
May 02 2024 - 10:16AM
Business Wire
AM Best has affirmed the Financial Strength Rating of B+
(Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of
New Zealand Medical Indemnity Insurance Limited (NZMII) (New
Zealand). The outlook of these Credit Ratings (ratings) is
stable.
The ratings reflect NZMII’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).
NZMII’s balance sheet strength is underpinned by risk-adjusted
capitalisation at the strongest level as of 31 March 2023 (fiscal
year-end 2023), as measured by Best’s Capital Adequacy Ratio
(BCAR). Prospective risk-adjusted capitalisation remains sensitive
to the pace of the company’s business growth and the size of future
dividend distributions given its modest capital base. Additionally,
the company’s balance sheet strength is supported by its
conservative investment portfolio, consisting mainly of cash and
fixed-income securities. Partially offsetting factors include the
company’s small absolute capital base, which increases the
sensitivity of capital to shock events, and its limited financial
flexibility.
NZMII’s operating performance is assessed as adequate,
demonstrated by a five-year average return-on-equity (ROE) ratio of
14% (fiscal years 2019-2023). The company’s overall operating
performance has improved significantly since fiscal year 2021, as a
result of remedial actions taken by management, including premium
rate adjustments and shifting the composition of the investment
portfolio to reduce investment risk. In fiscal year 2023, the
company recorded a favourable ROE of 15.7% and a combined ratio of
64.5%, as calculated by AM Best. Additionally, NZMII’s earnings
continue to be supported by healthy investment income, with the
five-year average net investment yield (including gains) standing
at 3.4% (fiscal-years 2019-2023). Although prospective underwriting
results remain sensitive to increased claims and elevated expenses,
operating profitability is expected to remain positive and
supportive of the adequate assessment.
AM Best assesses NZMII’s business profile as limited given its
position as a small and niche insurer in New Zealand providing
medical indemnity insurance to medical practitioners and health
professionals. The company’s claims consist largely of legal fees
excluding medical injury costs. As a monoline insurer with
operations in a single country, AM Best views the company as having
limited geographic and product diversification. Access to new
business is supported by NZMII’s affiliation with the New Zealand
Resident Doctors’ Association.
NZMII’s ERM is assessed as appropriate given the size and
complexity of its operations. A key risk over the medium to long
term is the disestablishment of district health boards in New
Zealand, which provide considerable support to the company in
accessing new business. However, the company’s management has taken
measures to mitigate this risk by actively engaging with the new
centralised body replacing the district health boards, Health New
Zealand, to smooth the transition and maintain access to new
business prospectively.
Ratings are communicated to rated entities prior to
publication. Unless stated otherwise, the ratings were not amended
subsequent to that communication.
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual
ratings referenced in this release, please see AM Best’s Recent
Rating Activity web page. For additional information regarding the
use and limitations of Credit Rating opinions, please view Guide to
Best’s Credit Ratings. For information on the proper use of Best’s
Credit Ratings, Best’s Performance Assessments, Best’s Preliminary
Credit Assessments and AM Best press releases, please view Guide to
Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specialising in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
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Ken Lau Senior Financial Analyst +65 6303
5025 ken.lau@ambest.com Victoria Ohorodnyk Director,
Analytics +65 6303 5020 victoria.ohorodnyk@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310 christopher.sharkey@ambest.com
Al Slavin Senior Public Relations Specialist +1
908 882 2318 al.slavin@ambest.com