Ratings agency A.M. Best has affirmed the “A-” (Excellent) financial strength rating and the “a-” long-term issuer credit rating of Police Health Plan Limited. The outlook of the ratings is stable.
A.M. Best said the ratings reflect Police Health Plan’s balance-sheet strength, which it categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Police Health Plan provides medical insurance exclusively to police employees and their families.
Its balance-sheet strength is supported by its solid risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). It has moderate underwriting leverage and a favorable liquidity position. However, its capital size is modest compared with similar insurers rated by A.M. Best.
A.M. Best said Police Health Plan has a track record of favorable underwriting performance; stable investment income, with a five-year average operating ratio of 92%; and a highly efficient cost structure.
“As a strongly capitalized non-profit insurer, PHP has been targeting a break-even position on operating costs, and its profit margins have declined in recent years as planned,” A.M. Best said. “In addition, management has budgeted a high claims ratio for upcoming years.
“However, A.M. Best expects that PHP would be able to respond quickly to any unanticipated deterioration in results, as it has done previously,” it added.
As a niche insurer, the company has a market share of less than 3% based on in-force premiums. However, A.M. Best said its close integration with the New Zealand Police Association has enabled the company to gain synergies and operating efficiency.
A.M. Best said it considers Police Health Plan’s risk management capabilities to be aligned appropriately with its risk profile. The company is well-positioned for its current rating level. However, negative rating actions may occur if inadequate pricing leads to a major underwriting deficit or if capitalization erodes significantly below its target surplus capital, the ratings agency added.