SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Youi NZ Pty Limited (Youi NZ) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Youi NZ’s balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management. In addition, the ratings factor in a neutral holding company impact from the company’s ultimate majority ownership by Rand Merchant Investment Holdings Limited.
These rating actions follow an announcement by Youi NZ on Sept. 24, 2019, that it has entered into an arrangement with Tower Insurance Limited (TIL), which is expected to result in TIL acquiring Youi NZ’s existing insurance obligations, via a portfolio transfer targeted to complete during the fourth quarter of 2019. Youi NZ is in the process of notifying its policyholders of the proposed transfer, with the transaction also remaining subject to necessary legal and regulatory approvals. AM Best expects Youi NZ to continue to operate and service its policyholders in a business-as-usual manner until such point that the proposed transaction is completed.
Youi NZ’s balance sheet strength is underpinned by its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which remains at the strongest level. This reflects its low underwriting leverage, prudent reinsurance program and conservative investment strategy. Partially offsetting balance sheet strength factors include the company’s modest absolute capital base, and its high usage and reliance on third-party reinsurance.
Operating performance is assessed as marginal. Operating results have been largely negative since 2014, impacted by the company’s start-up nature and high expenses relative to the size of its premium base. Nonetheless, the company has reported operating profits in fiscal-years 2018 and 2019, supported by reduced advertising and management costs.
Youi NZ is a non-life insurer focused on residential home and motor insurance in New Zealand. The company’s limited business profile assessment is largely a result of its small-scale operations and geographical concentration in New Zealand.
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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