SINGAPORE--(BUSINESS WIRE)--AM Best has removed from under review with developing implications and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of nib nz insurance limited (nib nz insurance) (New Zealand). The outlook assigned to these Credit Ratings (ratings) is stable. Concurrently, AM Best has withdrawn the ratings as the company has requested to no longer participate in AM Best’s interactive rating process.
These rating actions follow the completed acquisition of 100% ownership of Kiwi Insurance Limited (Kiwi Insurance) on 29 April 2022, by nib nz holdings limited (nib nz holdings). The transaction, previously announced in November 2021, also includes the establishment of an exclusive relationship with Kiwibank Limited (Kiwibank), which will see the bank refer its retail customers to nib nz holdings for their life insurance needs. Following the transaction, Kiwi Insurance has been renamed as nib nz insurance.
The ratings reflect nib nz insurance’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). In addition, the ratings factor in a neutral impact from the company’s ultimate ownership by nib holdings limited (nib group), a health insurer listed on the Australian Stock Exchange (ASX) that provides health insurance in Australia and New Zealand.
nib nz insurance’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which was at the strongest level as of fiscal year-end 2021 and is expected to remain at this level over the medium term. This reflects the company’s moderate underwriting leverage and conservative investment allocation. Over the medium term, AM Best expects full earnings retention to support the company’s business initiatives. A partially offsetting balance sheet factor is nib nz insurance’s modest capital base, which increases the sensitivity of capital adequacy to stress scenarios and changes in future performance.
AM Best considers nib nz insurance’s operating performance to be adequate. Despite a moderate level of volatility during the past five years, the company achieved a weighted average return-on-equity ratio of 9% over the period (fiscal years 2017-2021). Overall earnings during this period reflect a combination of favourable underwriting performance, coupled with robust investment returns. 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 nib nz 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 2021 gross premiums written. Despite this, the company’s business profile assessment factors in a strong distribution network driven by the establishment of an exclusive relationship with Kiwibank to distribute nib nz holdings’ products to its retail customers. In addition, as part of the nib group, nib nz insurance benefits from common branding and access to shared group resources.
AM Best views nib nz insurance’s ERM approach as appropriate given the size and complexity of the company’s current operations. Although the company is expected to be exposed to a level of integration risk over the near term, these risks are expected to be managed appropriately. nib nz insurance’s risk management capabilities are typically aligned with its risk profile.
Based on an assessment of the credit fundamentals of nib group, as well as consideration of the perceived strategic importance and integration of nib nz insurance to the group, no rating lift or drag has been applied to nib nz insurance’s ratings.
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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