Ratings agency A.M. Best has affirmed the “B+” (Good) financial strength rating and the “bbb-” long-term issuer credit rating of “bbb-” of New Zealand Medical Professionals Limited (NZMPL). The outlook for these credit ratings is stable.
According to A.M. Best, the ratings reflect NZMPL’s balance sheet strength, which the agency categorises as adequate, as well as its strong operating performance, limited business profile and marginal enterprise risk management.
The firm’s balance sheet strength is supported by solid risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). However, its capital size is small compared with similar insurers rated by A.M. Best and it has low earnings retention. It maintains a thin buffer above the minimum local regulatory capital requirement and has limited financial flexibility with no access to capital markets.
“The company also benefits from a competitive expense ratio by offering its products through an affiliation with the New Zealand Resident Doctors’ Association,” A.M. Best said. “Prospectively, A.M. Best expects the company to continue delivering stable earnings, supported by steady revenue growth, favourable claims experience and a low expense ratio in the near term.”
NZMPL is a small-sized insurer in New Zealand that provides medical malpractice insurance to medical practitioners and health professionals. As a monoline insurer that operates in a niche market, the company has a limited market profile and generates a very small percentage of industry premiums.
It has a low product risk profile with a small average claims size. Its claims consist largely of legal fees as most of the medical injuries are covered by the Accident Compensation Corporation (ACC).
“NZMPL has some exposure to operational risk. The company has outsourced most of its operations to third-party service providers due to its small scale,” it added.
“A lack of oversight and management controls creates the major risk associated with this outsourcing. Hence, the company’s risk management capabilities are not aligned with its risk profile.”
While NZMPL is well-positioned for its current rating level, negative rating actions may occur if there is a significant deterioration in its operating results due to adverse claims experience or if capitalisation erodes significantly below its target surplus capital due to factors such as higher-than-expected dividend payouts, the agency added.
