SINGAPORE–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Union Medical Benefits Society Limited (UniMed) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect UniMed’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
UniMed’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which remained at the strongest level for fiscal year ended 30 June 2021. This reflects the company’s low underwriting leverage and moderate risk investment strategy. In addition, the company’s regulatory solvency position remains substantially higher than the regulatory minimum requirement and its own internal minimum threshold. As a member-owned organisation, AM Best considers UniMed’s financial flexibility to be limited. However, this is mitigated partially by the company’s prudent approach to capital management and its track record of robust internal capital generation.
AM Best views UniMed’s operating performance as strong, with a five-year average return-on-equity ratio of 8.6% and an operating ratio of 89.8% (fiscal years 2017-2021). The company’s overall operating results during this period reflect a combination of generally strong underwriting performance and robust investment returns. UniMed benefits from its ability to adjust premium rates rapidly in response to any claims deterioration, and an efficient cost structure that allows it to offer competitive health coverage and premiums to its members. Prospectively, AM Best expects the company’s operating performance to be exposed to changes in interest rates and capital market volatility through its investment portfolio. In addition, the recent investment in marketing activities and technology infrastructure is expected to drive an increase in expense ratio.
AM Best considers UniMed’s business profile as limited, largely reflecting the company’s small-scale operations and its limited product and geographic diversification in New Zealand. The company is a not-for-profit organisation that provides health insurance with a market share of approximately 4% in New Zealand’s health insurance industry, based on gross premiums written in 2021. In addition, AM Best views the company as having a concentration toward a small number of large group medical accounts, which increases the susceptibility of overall earnings to changes in the performance of these key accounts. AM Best expects the company’s notable investments in marketing and technology to support its next phase of accelerated growth and customer retention.
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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