AM Best has revised the outlook to positive from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb” (Good) of Beneficial Insurance Limited (Beneficial) (New Zealand). The outlook of the FSR is stable.
The Credit Ratings (ratings) reflect Beneficial’s balance sheet strength, which AM Best assesses as adequate, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
The revised Long-Term ICR outlook reflects AM Best’s expectation that Beneficial’s balance sheet strength rating fundamentals will continue to strengthen over the medium term, with internal profit generation and retention that supports growth in the company’s absolute capital base, while maintaining its strong operating performance.
Beneficial’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which was at the strongest level as of 31 March 2023, as measured by Best’s Capital Adequacy Ratio (BCAR). This reflects Beneficial’s moderate net underwriting leverage and conservative investment strategy. The company’s risk-adjusted capitalisation is expected to remain at the strongest level, supported by internal retention of earnings over the medium term. Partially offsetting these balance sheet factors is the company’s small absolute capital base, which increases the sensitivity of capital adequacy to stress scenarios and to changes in future performance. AM Best’s balance sheet strength analysis also incorporates a neutral holding company impact following an assessment of consolidated risk-adjusted capitalisation at Beneficial’s parent, Beneficial Holdings Limited.
Beneficial has a track record of strong operating performance, as evidenced by a five-year weighted average return-on-equity ratio of 39.2% (fiscal years 2019-2023). The company’s overall profitability is driven by the favourable underwriting performance of its core pet insurance portfolio. AM Best expects Beneficial to maintain strong operating performance over the medium term, benefiting from moderate revenue growth and sustained low loss ratios, coupled with positive investment income.
AM Best views Beneficial’s business profile to be limited, largely reflecting the company’s small-scale operations and its limited product and geographic diversifications. The company is a niche insurer with a good market presence in the pet insurance sector in New Zealand, albeit maintaining a small overall market share in the domestic general insurance industry. AM Best expects the company to exhibit moderate underwriting growth, driven by continued development of its pet insurance business, as well as its existing non-pet insurance-related product offerings and new product initiatives.
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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