SINGAPORE--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of “bbb+” of Consumer Insurance Services Limited (CISL) (New Zealand). The outlook for each rating is stable.
The affirmation of the ratings reflects CISL’s adequate risk-adjusted capitalization and consistently strong operating performance.
CISL offers consumer protection insurance originated by the entities of its immediate parent, Fisher & Paykel Finance Holdings Limited (F&PFH). CISL’s ultimate parent is Australia-based FlexiGroup Limited [ASX: FXL], which acquired F&PFH earlier this year.
CISL currently holds a modest amount of capital above its local regulatory capital requirements. An evaluation of its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), also shows that the company’s risk-adjusted capitalization remains supportive of its current ratings. Claims experience has been fairly stable and favorable, which is typical of the types of loan and card repayment insurance contracts that CISL writes. The company also invests conservatively, which generates a stable stream of interest income that further supports its operating profitability without undertaking significant credit and market risk.
The key offsetting rating factors are CISL’s modest capital size and small in-force portfolio. In addition, due to relatively low earnings retention, the growth of premium revenue could potentially outpace the growth of capital, resulting in a higher underwriting leverage, as measured by the company’s premium-to-capital ratio.
Upward rating actions are unlikely in the short to medium term. Negative rating actions could occur if CISL’s local regulatory solvency margin falls below the company’s target provided to A.M. Best due to higher-than-expected dividend payout or if the company fails to maintain its strong and consistent operating performance. In addition, the ratings could be downgraded if there is a significant deterioration in the financial strength of its ultimate parent due to excessive leverage or shock from adverse macroeconomic events.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.
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