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FOR IMMEDIATE RELEASE
SINGAPORE - APRIL 09, 2024 09:13 AM (EDT)
AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of Momentum Life Limited (Momentum Life) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Momentum Life’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM). In addition, the ratings factor in a neutral impact from the company’s 100% ownership by BlueInc Group Pty Limited.
AM Best expects Momentum Life’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), to remain at the strongest level over the medium term. Although the company’s planned material business expansion is expected to drive increased capital requirements, AM Best expects available capital to remain sufficient to support the growth of underwriting operations over the medium term. Additionally, the company’s balance sheet strength is supported by its conservative investment portfolio, consisting of cash and term deposits. Partially offsetting factors are Momentum Life’s small absolute capital base, which increases its sensitivity to stress scenarios, as well as its high reliance on third-party reinsurance for risk transfer and upfront commission financing.
AM Best considers Momentum Life’s operating performance to be adequate with a five-year average return-on-equity ratio of 5.2% (as calculated by AM Best). In fiscal year 2023 and the first half of fiscal year 2024, Momentum Life reported an operating loss, mainly driven by elevated lapse rates and higher expenses related to the company’s relocation of its Australian administrative support operations to New Zealand. Since its inception as a capitalised insurer in 2018, Momentum Life’s earnings have been constrained by a high expense ratio, given its small premium base in its initial phase. However, the company’s operating performance has been supported by the favourable trail commission arising from insurance distribution operations prior to 2018, as well as reinsurance commission income, which have both partially offset outward acquisition costs during the company’s initial growth phase. Over the medium term, AM Best expects the company to report positive earnings as it grows in scale and executes its strategic business plan.
AM Best views Momentum Life’s business profile as limited, reflecting the company’s small scale as a startup insurer and its concentration of business in New Zealand’s life insurance sector. The products offered by Momentum Life include guaranteed acceptance funeral insurance and fully underwritten term life insurance products, which have a low risk profile. Momentum Life benefits from good control over its underwriting and sales practices, with all products distributed through its wholly owned subsidiary.
Momentum Life’s ERM is assessed as appropriate for the size and complexity of the company’s operations. AM Best considers continual risk management developments as necessary in order to support the company’s increasing operational scale 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.
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 Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.