AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Union Medical Benefits Society Limited (UniMed) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect UniMed’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.

UniMed’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which was at the strongest level for fiscal-year ending 30 June 2023, reflecting the company’s low underwriting leverage and moderate investment risk. The company’s regulatory solvency position was substantially higher than the regulatory minimum requirement and its own internal minimum threshold. As a member-owned organisation, AM Best considers UniMed’s financial flexibility to be limited. However, this is mitigated partially by the company’s prudent approach to capital management and its track record of robust internal capital generation.

AM Best views UniMed’s operating performance as adequate, with a five-year average return-on-equity ratio of 4.7% and a combined ratio of 95.7% (fiscal years 2019 – 2023). The revision of the operating performance assessment to adequate from strong reflects increased pressure on the company’s underwriting results in recent periods due to adverse claims experience. In fiscal-year 2023, UniMed recorded a combined ratio of 101.1%, driven by above-budget losses. While the company’s management has implemented remedial actions to improve underwriting performance, such as rate increases, loss ratios are expected to remain elevated over the near-to-medium term. As a not-for-profit insurer, investment income remains a key driver of UniMed’s operating performance, with the company recording a five-year average net investment return (including gains/losses) of 2.1% (fiscal years 2019 – 2023). Prospectively, AM Best expects UniMed’s adequate operating performance to be supported by its stringent pricing controls and positive investment returns.

AM Best has revised UniMed’s business profile to neutral from limited due to the company’s strengthened market profile in the New Zealand health insurance industry following the acquisition and transfer of Accuro Health Insurance Society Limited’s insurance portfolio in fiscal-year 2024. UniMed is a not-for-profit organisation that provides health insurance to its members in New Zealand. As a monoline insurer, UniMed has limited product diversification. However, UniMed benefits from its low product risk, with limited exposure to large loss and catastrophe events. Prospectively, AM Best expects the company’s ongoing investments in technology and marketing to support its next phase of accelerated growth and customer retention.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

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