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New Zealand Medical Professionals Limited has had its financial strength rating of B+ (Good) and its long-term issuer credit rating of “bbb-” affirmed by ratings agency AM Best. The outlook for the rating is stable.
According to AM Best, the ratings reflect New Zealand Medical Professionals’ adequate balance sheet strength, as well as its strong operating performance, limited business profile and marginal enterprise risk management (ERM).
“NZMPL’s balance sheet strength is underpinned by its risk-adjusted capitalisation,” AM Best said. “However, an offsetting factor to the balance sheet strength assessment is the company’s small absolute capital base, which increases the sensitivity of capital adequacy to shock events.”
The ratings agency considers New Zealand Medical Professionals to have limited financial flexibility, with a dependence on shareholders for financial support, if needed. These offsetting factors are said to be mitigated partially by the company’s new reinsurance protection, which has reduced the company’s net retention on any single claim and is expected to decrease earnings volatility in the future.
AM Best noted the insurer’s underwriting performance in 2018, which has deteriorated due to adverse claims experience. In response, New Zealand Medical Professionals increased prices across most of its product range. Following this, AM Best expects the firm to maintain favourable operating results supported by a robust underwriting discipline and stable investment returns.
Moreover, AM Best views New Zealand Medical Professionals’ ERM as marginal given the size and complexity of its operations. With most of its operation outsourced to third-party service providers, the insurer has some exposure to operational risk given its small size, the ratings agency added.
