AM Best affirmed the financial strength rating of B+ (good) and the issuer’s long-term credit rating of “bbb-” (good) from
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).
The strength of NZMII’s balance sheet is based on its risk-adjusted capitalization, which is expected to remain at the highest level over the medium term, as measured by Best’s capital adequacy ratio (BCAR). Balance sheet strength factors partially offset the company’s limited financial flexibility and weak absolute capital base, which increases the sensitivity of capital adequacy to shock events.
AM Best also considers NZMII’s operating performance to be adequate, as evidenced by a five-year average return on equity ratio of 11.3% (fiscal years 2017-2021). After a period of adverse claims experience in fiscal years 2018 and 2019, NZMII’s underwriting performance has improved over the past two years due to corrective actions taken by management, including premium rate adjustments. In addition, technical performance improvements were partly driven by lower claims frequency due to COVID-19 related movement restrictions. Overall earnings are supported by NZMII’s strong investment income, with the company reporting a five-year average net return (including gains) of 5.2% (FY 2017-21).
AM Best considers NZMII’s business profile to be limited given its position as a small niche insurer in
NZMII’s ERM is considered appropriate given the size and complexity of its operations. The company has a 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 appropriate measures to mitigate this risk, including the use of high quality suppliers and contractual arrangements to ensure continuity of services.
Ratings are communicated to rated entities before publication. Unless otherwise indicated, the ratings have not been changed as a result of this communication.
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Source: AM Best