SINGAPORE--(BUSINESS WIRE)--AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of �bb+� (Fair) of Provident Insurance Corporation Limited (PICL) (New Zealand).

The Credit Ratings (ratings) reflect PICL�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).

The positive outlooks reflect an improving trend in PICL�s balance sheet fundamentals, including risk-adjusted capitalisation and the size of the company�s absolute capital base. These factors, coupled with AM Best�s expectation of sustainable business growth and robust operating results over the medium term, could lead to positive rating actions.

The company�s balance sheet strength assessment is underpinned by risk-adjusted capitalisation, which is at the strong level in fiscal year (FY) 2022, as measured by Best�s Capital Adequacy Ratio (BCAR). AM Best expects PICL�s risk-adjusted capitalisation to remain at least a strong level over the medium term, supported by positive retained earnings and conservative investment strategy. Offsetting balance sheet factors include exposure to long-duration policies that increases reserving risks, and a dividend policy anticipated to distribute the majority of profits.

AM Best views PICL�s operating performance as adequate. The company reported a five-year average return-on-equity ratio of 12% (FYs ending 31 March 2018 � 2022), showing a positive trend in underwriting performance over this period. After worse-than-expected loss experience of the company�s core insurance products in FY2020, which resulted in targeted premium rate adjustments and strengthening of underwriting controls, underwriting results in FY2021 and FY2022 have shown improvement. The low claim frequency in its mechanical breakdown insurance (MBI) and private motor vehicle (PMV) business from lower usage of motor vehicles during the COVID-19 pandemic resulted in a combined ratio of 93% for FY2022. PICL has made key investments and updated product offerings to support its prospective operating performance.

AM Best assesses PICL�s business profile as limited. This reflects the company�s relatively modest scale of operations and limited geographical diversification, with all business emanating from New Zealand. PICL is a niche insurer that focuses on MBI and PMV products, largely distributed through motor dealerships and several distribution partners across its domestic market. PICL is exposed to a moderate level of pricing risk arising from its rapid growth from past years and the underwriting of multi-year policies, largely in the MBI segment, which might result in inadequate pricing on long-duration policies.

AM Best assesses PICL�s ERM as appropriate, given the size and the complexity of its operations. AM Best views the successful execution of the company�s underwriting strategy and planned infrastructure investment to be a key risk exposure. Over the medium term, PICL�s risk management capabilities are expected to continue to develop in order to support increasing operational scale and widening product offerings.

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.

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Contacts

Isaac Yeo
Associate Financial Analyst
+65 6303 5019
[email protected]

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
[email protected]

Michael Dunckley, CFA
Director, Analytics
+65 6303 5020
[email protected]

Al Slavin
Senior Public Relations Specialist
+1 908 439 2200, ext. 5098
[email protected]