AM Best has affirmed Accuro Health Insurance Society’s financial strength rating of B+ (good) and the long-term issuer credit rating of “bbb-“ (good). The outlook of these ratings is negative.
According to AM Best, the ratings reflect Accuro’s balance sheet strength, which have been assessed as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The ratings agency said it’s assessment of Accuro’s balance sheet strength 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 making substantial investments to upgrade its policy administration system, and AM Best expects the associated development and implementation costs 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 said.
Accuro’s regulatory solvency position is expected to remain appropriate. However, its buffer above the regulatory minimum is expected to decline over the near term. AM Best also noted that the company had a small absolute capital base of $10.1 million as of Aug. 31, 2021, which makes its capital adequacy more sensitive to stress scenarios. AM Best said it considers Accuro’s financial flexibility to be limited, given its status as a member-owned organisation. However, the company can make rate adjustments on relatively short notice to support profitability.
Accuro’s operating performance was assessed to be adequate, with a five-year average return-on-equity ratio of 4.6%. The company’s combined ratio is usually at the break-even level, reflecting its status as a not-for-profit insurer.
“The company’s business profile assessment of limited reflects its relatively small-scale operations, and limited product and geographic diversification,” AM Best said. “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.”