SINGAPORE–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Accuro Health Insurance Society Limited (Accuro) (New Zealand). The outlook of these Credit Ratings (ratings) is negative.
The ratings reflect Accuro’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.
Accuro’s balance sheet strength assessment is supported by its risk-adjusted capitalisation, which is expected to remain at least at the adequate level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). Accuro is undertaking a substantial investment to upgrade its policy administration system, with the development and implementation costs expected to drive an increase in intangible assets in the near term. The negative outlook reflects the ongoing uncertainty and potential pressure on Accuro’s risk-adjusted capitalisation in the near to medium term, which remains sensitive to changes in intangible assets and fluctuations in earnings.
AM Best expects Accuro’s regulatory solvency position to remain appropriate, although the buffer above the regulatory minimum is expected to decline over the near term. In addition, the company has a small absolute capital base of NZD 10.1 million, at fiscal year end 31 August 2021, which increases the sensitivity of its capital adequacy to stressed scenarios. AM Best considers Accuro’s financial flexibility to be limited, given its status as a member-owned organisation. However, the company has the ability to make rate adjustments on relatively short notice to support profitability.
AM Best views Accuro’s operating performance to be adequate with a five-year average return-on-equity ratio of 4.6% (fiscal years 2017-2021). The company’s combined ratio has typically tracked at the break-even level, reflective of Accuro’s status as a not-for-profit organisation that provides health insurance in New Zealand. Investment income remains a key driver of Accuro’s operating performance, with a five-year average net investment yield (including gains/losses) of 3.1% (fiscal years 2017-2021).
The company’s business profile assessment of limited reflects its relatively small-scale operations, and limited product and geographic diversification. Accuro had less than a 3% market share in New Zealand’s health insurance industry based on gross written premiums in 2021. The company has achieved modest premium growth over the past five years, supported by competitive advantages arising from innovative product offerings and high-quality customer service.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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