AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) for specialist insurer New Zealand Medical Indemnity Insurance Limited (NZMII). The outlook assigned to both ratings is stable.
The affirmation reflects NZMII’s adequate balance sheet strength, operating performance, limited business profile, and appropriate enterprise risk management, according to AM Best.
As of the fiscal year ending March 31, 2024, NZMII’s risk-adjusted capitalisation remained at the strongest level, as determined by Best’s Capital Adequacy Ratio (BCAR). This strength is supported by a conservative investment approach, with the portfolio primarily consisting of cash and fixed-income securities. However, AM Best noted the company’s small capital base increases its sensitivity to shock events and limits its financial flexibility. Future capital strength may be influenced by the company’s pace of business growth and the scale of dividend distributions.
The insurer’s operating performance was assessed as adequate. In fiscal year 2024, NZMII recorded a return-on-equity ratio of 25.8% and a net/net combined ratio of 66.3%. These improvements have been attributed to actions taken since 2021 by company management, including premium rate adjustments and a strategic shift in investment composition to minimise risk exposure. Investment income continues to support earnings, with a reported net investment yield of 8.2% for the same period.
NZMII’s business profile remains limited, with operations restricted to a single country and a single line of business. The company provides medical indemnity insurance specifically to medical practitioners and health professionals in New Zealand. Its claims are largely composed of legal fee reimbursements and do not include costs associated with medical injury. Due to its size and scope, AM Best views NZMII’s geographic and product diversification as constrained. The insurer’s connection with the New Zealand Resident Doctors’ Association continues to provide access to new clients.
Enterprise risk management was assessed as appropriate in relation to the size and complexity of the organisation. AM Best identified the dissolution of district health boards – a key source of client access – as a medium- to long-term risk. In response, NZMII has engaged with Health New Zealand, the centralised body replacing the boards, and has worked to strengthen relationships to sustain business inflows.
AM Best concluded that NZMII’s ratings are reflective of its consistent operating performance and sound capitalisation relative to its scale, with no immediate pressures expected in the near term.
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