Press Release - MAY 10, 2019
AM Best Affirms Credit Ratings of Police Health Plan Limited
FOR IMMEDIATE RELEASE
SINGAPORE - MAY 10, 2019
The ratings reflect PHP’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
PHP’s balance sheet strength is underpinned by risk-adjusted capitalization that remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). This reflects its moderate underwriting leverage and prudent investment strategy. However, an offsetting factor is the company’s small capital base, which increases the potential for volatility in its risk-adjusted capitalization.
Operating performance is adequate, with a moderate level of volatility, as demonstrated by a five-year average return-on-equity ratio of 7.8% (fiscal years 2014-2018). PHP benefits from a highly efficient cost structure that allows it to offer competitive health coverage and premiums to its members. Profit margins have declined in recent years due to the mutual insurer’s strategy to achieve break-even operating results. Nevertheless, PHP continues to post positive operating earnings, driven by robust investment returns. AM Best expects PHP to maintain adequate operating results, supported by favorable investment returns and its demonstrated ability to adjust premium rates rapidly in response to any deterioration in claims experience.
PHP is a non-profit organization that provides health insurance exclusively to current and former police force members and their families. The company’s business profile is assessed as neutral, despite its small market share and concentration in New Zealand’s health insurance market. It has a high penetration rate within the police force and its close integration with its ultimate parent, the New Zealand Police Association, gives rise to synergy and efficiency benefits. The company has preferential access to the police force in New Zealand, benefits from low distribution costs and shares overhead costs with the broader group. Despite challenging market conditions, its membership has grown steadily in recent years due to government initiatives aimed at growing the police force.
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 Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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