AM Best has affirmed the financial strength rating of B+ (Good) and long-term issuer credit rating of “bbb-” (Good) of New Zealand Medical Indemnity Insurance (NZMII), formerly New Zealand Medical Professionals. The outlook on both ratings was stable.
AM Best assessed NZMII’s balance sheet strength as adequate, partially offset by the company’s limited financial flexibility and a small absolute capital base which increases the sensitivity of capital adequacy to “shock events”.
The ratings agency also assessed NZMII’s operating performance as adequate, demonstrated by a five-year average ROE ratio of 11.3%. Following a period of unfavourable claims experience in 2018 and 2019, its underwriting performance improved over the past two fiscal years due to the remedial actions taken by management, including premium rate adjustments.
Overall earnings were supported by NZMII’s robust investment income, having reported a five-year average net investment yield of 5.2%
AM Best viewed NZMII’s business profile as limited given its position as a monoline insurer with operations in a single country. Its niche focus – providing medical indemnity insurance to medical practitioners and health professionals in New Zealand – offers limited geographic and product diversification. NZMII’s claims largely consist of legal fees, excluding medical injury costs.
Access to new business is supported by its affiliation with the New Zealand Resident Doctors’ Association.
AM Best considered NZMII’s ERM appropriate given the size and complexity of its operations. While it has “moderate” exposure to operational risks, having outsourced most of its operations to third-party service providers, its management has taken suitable measures to mitigate this risk, including using high quality providers and contract arrangements to ensure the continuity of services.
