SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Union Medical Benefits Society Limited (UniMed) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect UniMed’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
UniMed’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which was at the strongest level for fiscal year ended 30 June 2022 reflecting the company’s, low underwriting leverage and moderate risk investment strategy. The company’s regulatory solvency position was substantially higher than the regulatory minimum requirement and its own internal minimum threshold. As a member-owned organisation, AM Best considers UniMed’s financial flexibility to be limited. However, this is mitigated partially by the company’s prudent approach to capital management and its track record of robust internal capital generation.
AM Best views UniMed’s operating performance as strong, with a five-year average return-on-equity ratio of 6.0% and a combined ratio of 93.4% (fiscal years 2018-2022). In recent years, the company’s overall operating results experienced volatility as a result of COVID19 and volatile investment markets. UniMed benefits from its ability to adjust premium rates rapidly in response to any claims deterioration, as well as an efficient cost structure that allows it to offer competitive health coverage and premiums to its members. Prospectively, AM Best expects the company’s operating performance to remain robust although investment in marketing activities and technology infrastructure is expected to drive an increase in its expense ratio over the medium term.
AM Best assesses UniMed’s business profile as limited, largely reflecting its small-scale operations and its limited product and geographic diversifications. The company is a not-for-profit organisation that provides health insurance to its members in New Zealand. In addition, AM Best views the company as having a concentration toward a small number of large group medical accounts, which increases the susceptibility of overall earnings to changes in the performance of these key accounts. AM Best expects the company’s investments in marketing and technology to support its next phase of accelerated growth and customer retention.
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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