A.M. Best Affirms Ratings of Beneficial Insurance Limited

SINGAPORE--(BUSINESS WIRE)-- A.M. Best has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of Beneficial Insurance Limited (BIL) (New Zealand). The outlook for both ratings is stable.

The rating affirmations reflect BIL’s adequate risk-adjusted capitalization, continued growth of its pet health insurance business, and low product risk profile.

On a risk-adjusted basis, BIL continues to demonstrate adequate capitalization to support its net required capital, as evaluated by Best’s Capital Adequacy Ratio (BCAR). Despite a material exposure to illiquid assets relative to capital size, BIL’s underwriting leverage remains conservative, and the operation continues to focus on a high-frequency, low-severity line of business. Hence, BIL’s overall capitalization is deemed adequate to support its overall underwriting and asset risks.

Since fiscal year 2012, both premium revenue and policies from BIL’s pet insurance business have expanded rapidly. Despite an average premium growth rate of almost 30% per annum, reflective of a low product risk profile, the company was able to maintain its claims ratio within a tight range to 49% from 47%.

Partially offsetting these positive rating factors are BIL’s relatively high operating expense ratio, small capital size and significant surplus exposure to illiquid assets.

While BIL continued to report favorable claims experience in a niche line of business, its operating expense ratio remained considerably higher than other health insurers in New Zealand, as well as other pet health insurers in other major markets. This is likely due to a small premium base to spread the company’s overhead costs. As a result, combined and operating ratios, on average, remained in excess of 100%.

With a capital size of approximately NZD 4.1 million (approximately USD 3.1 million), BIL had a modest equity buffer against the minimum capital requirement under the Reserve Bank of New Zealand’s non-life solvency standard.

Additionally, while loan receivables amount to almost two-thirds of BIL’s net assets, any sizeable impairment in the book value could put its capitalization under pressure.

Positive rating movement is unlikely unless the company can improve and maintain its combined and operating ratios at a level more comparable to its peers, as well as substantially reduce its surplus exposure to illiquid assets. Meanwhile, any significant adverse changes to industry environment, material deviations from its target claim loss ratio or substantial asset impairment could lead to a downgrading of its ratings.

Ratings are communicated to rated entities prior to publication, and 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 visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150916005897/en/

A.M. Best Company
Jason Shum
Financial Analyst
+65-6589-8400, ext. 217
[email protected]
or
Chi-Yeung Lok
Senior Financial Analyst
+65-6589-8400, ext. 211
[email protected]
or
Christopher Sharkey
Manager, Public Relations
+(1) 908 439 2200, ext. 5159
[email protected]
or
Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
[email protected]

Source: A.M. Best Company

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