AM Best Affirms Credit Ratings of Police Health Plan Limited

Business Wire

SINGAPORE--(BUSINESS WIRE)--
AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Police Health Plan Limited (PHP) (New Zealand). The outlook of these Credit Ratings (ratings) is negative.

The ratings reflect PHP’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. In addition, the ratings factor in a neutral impact from the company’s ultimate ownership by the New Zealand Police Association (NZPA).

The negative outlooks reflect the ongoing pressure on PHP’s operating performance, which also places pressure on its balance sheet strength fundamentals, given the declining risk-adjusted capitalisation due to underwriting losses and PHP’s limited financial flexibility.

PHP’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which is expected to remain at the strongest level, albeit with a declining trend in recent years driven by operating losses. AM Best views the company’s investment strategy to be low risk, with its investment portfolio consisting of cash and term deposits. As an insurer dedicated only to its captive membership base, PHP is considered to have limited financial flexibility. In addition, the company has a modest capital base, which increases the sensitivity of capital adequacy to stress scenarios or fluctuations in performance.

AM Best assesses PHP’s operating performance as adequate, albeit the company’s operating performance metrics have exhibited a decreasing trend over the past five fiscal years. PHP’s underwriting performance remains impacted by high claims inflation in New Zealand’s health insurance industry, with the company reporting material underwriting losses in fiscal year 2024 and 2025. While the company has implemented portfolio remediation actions such as premium rate increases, AM Best expects PHP’s near-term underwriting performance to remain under pressure. Nonetheless, PHP continues to benefit from its efficient cost structure, allowing it to offer competitive health coverage and premium rates to its members. As a not-for-profit insurer, investment income remains a key contributor to overall earnings. In fiscal year 2024, the company reported a net investment yield (including gains/losses) of 5.6%.

PHP provides health insurance exclusively to current and former members of the New Zealand police and their families. Despite having a relatively small premium base in New Zealand’s health insurance market, the company’s business profile assessment factors in its high penetration rate within the police force and its close integration with the NZPA, which gives rise to synergy and efficiency benefits. PHP has preferential access to the NZPA’s member base, benefits from low distribution costs, and shares overhead with the broader group.

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. For more information, visit www.ambest.com.