May 22, 2025 by matray

AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of New Zealand Medical Indemnity Insurance Limited (NZMII) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect NZMII’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).

NZMII’s balance sheet strength is underpinned by its risk-adjusted capitalisation being at the strongest level as of 31 March 2024 (fiscal year-end 2024), as measured by Best’s Capital Adequacy Ratio (BCAR). Prospective risk-adjusted capitalisation remains sensitive to the pace of the company’s business growth and the size of future dividend distributions given its modest capital base. Additionally, the company’s balance sheet strength is supported by its conservative investment portfolio, consisting mainly of cash and fixed-income securities. Partially offsetting factors include the company’s small absolute capital base, which increases the sensitivity of capital to shock events, and its limited financial flexibility.

NZMII’s operating performance is assessed as adequate, supported by a return-on-equity ratio of 25.8% and a net/net combined ratio of 66.3% in fiscal year 2024, as calculated by AM Best. The company’s overall operating performance has improved significantly since fiscal year 2021, as a result of remedial actions taken by the company’s management, including premium rate adjustments and shifting the composition of the investment portfolio to reduce investment risk. In addition, NZMII’s earnings remain supported by healthy investment income, with a net investment yield (including gains) of 8.2% in fiscal year 2024.

AM Best assesses NZMII’s business profile as limited given its position as a small and niche insurer in New Zealand providing medical indemnity insurance to medical practitioners and health professionals. The company’s claims consist largely of legal fees excluding medical injury costs. As a monoline insurer with operations in a single country, AM Best views NZMII as having limited geographic and product diversification. Access to new business is supported by the company’s affiliation with the New Zealand Resident Doctors’ Association.

NZMII’s ERM is assessed as appropriate given the size and complexity of its operations. A key risk over the medium to long term is the disestablishment of district health boards in New Zealand, which provide considerable support to the company in accessing new business. To date, NZMII has successfully managed this risk by actively engaging with Health New Zealand, the new centralised body that replaced the district health boards, and strengthening its network.