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FOR IMMEDIATE RELEASE
SINGAPORE - MAY 31, 2019 09:06 AM (EDT)
AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Kiwi Insurance Limited (Kiwi Insurance) (New Zealand). The outlook of these Credit Ratings (ratings) is stable. Kiwi Insurance is a majority-owned subsidiary of New Zealand Post Limited (NZ Post), which is a state-owned enterprise in New Zealand.
The ratings reflect Kiwi Insurance’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Kiwi Insurance’s balance sheet strength is underpinned by risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which is categorized as strongest. This reflects the company’s moderate underwriting leverage, as well as its low risk and highly liquid investment portfolio. Over the medium term, AM Best expects full earnings retention to support the company’s planned growth initiatives. A partially offsetting balance sheet factor is Kiwi Insurance’s modest absolute capital base, which AM Best views as increasing the sensitivity of risk-adjusted capitalization to shock events, as well as to changes in future performance and dividend payments.
AM Best considers operating performance to be adequate. Despite a moderate level of volatility during the past five years, the company has achieved an average return on equity ratio of 11% (fiscal years 2014-2018). Overall earnings during this period reflect a combination of favorable underwriting performance, coupled with low single digit but stable investment returns. Over the next three years, the company has budgeted increased capital expenditure, particularly in the area of digital distribution and client servicing, which is aimed at supporting prospective business growth and driving greater economies of scale. Despite the resulting increase in near-term expenses, AM Best expects the company to maintain adequate operating performance.
AM Best views Kiwi Insurance’s business profile as neutral. The company is a small-sized insurer in New Zealand’s life insurance industry, with a market share of less than 2%, based on 2018 gross written premiums. Despite this, AM Best views the company’s strong affiliated distribution channels as a benefit. The company’s parent, NZ Post, and its sister company; Kiwibank Limited, have extensive nationwide branch networks that support the distribution of Kiwi Insurance’s products. In addition, as part of the NZ Post group, Kiwi Insurance benefits from cross-selling opportunities, low acquisition costs and access to shared group resources. Despite challenging market conditions, the company’s in-force book has grown steadily over the past five years, supported by the development of new products. Going forward, the company’s growth strategy is expected to benefit from increased distribution through digital channels.
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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