A.M. Best Affirms Ratings of Union Medical Benefits Society Limited

HONG KONG--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Union Medical Benefits Society Limited (UniMed) (New Zealand). The outlook for both ratings is stable.

The rating affirmations reflect UniMed’s excellent risk-adjusted capitalization and solid investment results. The ratings also recognize the company’s initiatives to improve underwriting profitability through revising the pricing structures of its poorer performing products.

UniMed’s capitalization on a risk-adjusted basis, as measured by Best’s Capital Adequacy Ratio (BCAR), demonstrates that the company is strongly capitalized. In addition, the premium leverage ratio is maintained at a conservative level of 0.63 times. Although recent business expansion led to an increase in premium risk, UniMed’s underwriting leverage in relation to its book of business remains prudent. In A.M. Best’s opinion, UniMed will maintain its capitalization at a strong level.

With approximately 88% of invested assets as domestic and currency-hedged fixed-interest investments, UniMed’s investment income is of high quality and deemed to be sustainable. It is expected that the company’s underwriting business will continue to be complemented by a solid stream of investment income.

Offsetting these positive rating factors are the challenging economic conditions and the increasingly competitive environment UniMed faces within the local health insurance industry in New Zealand.

A.M. Best also takes into account that while management is actively pursuing non-organic growth opportunities, there are potential acquisitions ahead that could put UniMed’s risk-adjusted capitalization temporarily under pressure.

A significant deterioration in UniMed’s capitalization could lead to a downgrading of its ratings. However, an improved stability in the company’s underwriting performance could result in an upgrading of its ratings.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Understanding Universal BCAR”; “Understanding BCAR for Life/Health Insurers”; and “Risk Management and the Rating Process for Insurance Companies.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, 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 © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

Jason Shum
Associate Financial Analyst
+852-2827-3430
jason.shum@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
+1-908-439-2200, ext. 5378
rachelle.morrow@ambest.com
or
Moungmo Lee
General Manager
+852-2827-3402
moungmo.lee@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
+1-908-439-2200, ext. 5644
james.peavy@ambest.com

Source: A.M. Best Co.