SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” 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 categorizes as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
UniMed’s balance sheet strength is underpinned by risk-adjusted capitalization that is categorized as strongest, as measured by Best’s Capital Adequacy Ratio (BCAR). This reflects UniMed’s low underwriting leverage and conservative investment approach. Furthermore, the company is viewed to have a favorable liquidity position. As a mutual insurer, UniMed has no dividend commitments, but financial flexibility is limited.
UniMed’s operating performance is strong, with a track record of favorable earnings driven by a combination of sound underwriting performance and robust investment returns. The company has a five-year average combined ratio of 94% (2014-2018). Prospectively, AM Best expects UniMed to maintain strong operating results, supported by steady premium growth, adequate product pricing and robust investment returns.
AM Best assesses UniMed’s business profile as limited. The company is a small-sized not-for-profit insurer with a market share of less than 4% in New Zealand’s health insurance industry based on 2018 gross written premiums. UniMed’s underwriting portfolio continues to have limited product line and geographical diversification. In addition, the company has a concentration toward a few large group medical accounts, which increases the susceptibility of overall earnings to changes in the performance of these key accounts. Despite ongoing challenging market conditions, UniMed’s membership count is expected to increase gradually over the medium term. This is expected to be driven mainly by its newly launched retail offering and a recent portfolio transfer from The Education Benevolent Society Incorporated.
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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