AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of bbb of Momentum Life Limited (Momentum Life) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
As a start-up insurer, having commenced risk-bearing operations for the first time in March 2018, Momentum Life has a limited track record of operation. Consequently, AM Bests assessment of the companys rating fundamentals is principally forward looking in nature.
The ratings reflect Momentum Lifes balance sheet strength, which AM Best categorizes 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 companys 100% ownership by BlueInc Group Pty Limited (BlueInc Group).
Momentum Lifes risk-adjusted capitalization, as measured by Bests Capital Adequacy Ratio (BCAR), is expected to remain at the strongest level over the medium term. Despite high forecast underwriting growth during the companys start-up phase driving increasing capital requirements, AM Best expects available capital to remain sufficient to offset this planned business expansion. Partially offsetting balance sheet factors include Momentum Lifes very small absolute capital base, which increases its sensitivity to stressed scenarios, as well as its high reliance on third-party reinsurance for risk transfer and upfront commission financing.
AM Best considers Momentum Lifes operating performance to be adequate, with positive and gradually improving return on equity ratios expected over the medium term. At present, the companys underwriting performance is hampered partially by a high expense ratio, given its small premium base; however, this is expected to improve as the business continues to expand. AM Best views Momentum Lifes business profile as limited, reflecting the companys start-up nature and its concentration to New Zealands life insurance sector. The products offered by Momentum Life include guaranteed acceptance funeral insurance and lump-sum life insurance products, which are considered to have low product risk.
AM Best views Momentum Lifes ERM as appropriate given the size and complexity of the companys operations at present. Over the medium term, Momentum Lifes risk management capability will likely need to develop in order to support increasing operational scale and a widening of its product offerings.
Momentum Life receives no rating enhancement or drag from BlueInc Group. Momentum Life benefits from operational support provided by its parent and other subsidiaries of the group.
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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