AM Best Affirms Credit Ratings of Momentum Life Limited

·4 min read

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.

The ratings reflect Momentum Life’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). In addition, the ratings factor in no rating lift or drag from the company’s 100% ownership by BlueInc Group Pty Limited.

AM Best expects Momentum Life’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), to remain at the strongest level over the medium term. Despite forecasted underwriting growth during the company’s start-up phase driving increased capital requirements, AM Best expects available capital to remain sufficient to offset this planned business expansion over the medium term. Partially offsetting balance sheet factors include Momentum Life’s 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 Life’s operating performance to be adequate. The company has reported operating profits in fiscal years 2019 and 2020, with an average return-on-equity ratio of 8.6% over this period. As a start-up insurer, Momentum Life’s earnings are impacted partially by a high expense ratio, given its small premium base. However, the company’s operating performance to-date has been supported by the favorable run-off of trail commission assets arising from insurance distribution operations prior to 2018, and reinsurance commission income, which have both partially offset outward acquisition costs during the company’s initial growth phase. Prospectively, AM Best expects the company to record positive earnings over the medium term, as it grows in scale and executes its strategic business plan.

AM Best views Momentum Life’s business profile as limited, reflecting the company’s small scale as a start-up insurer and its concentration of business in New Zealand’s life insurance sector. The products offered by Momentum Life include guaranteed acceptance funeral insurance and lump-sum life insurance products, which have a low risk profile. Momentum Life benefits from good control over its underwriting and sales practices, with all products distributed through an affiliated entity, We Protect Limited.

AM Best views Momentum Life’s ERM as appropriate given the size and complexity of the company’s operations at present. The company’s risk management capabilities have developed since its inception, with regulatory compliance expected to remain a key priority. AM Best considers continual risk management developments as necessary to remain aligned with future changes in its risk profile, as the company increases its operational scale and widens its 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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

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

Yi Ding
Financial Analyst
+65 6303 5021
yi.ding@ambest.com

Alex Rafferty, ACA
Associate Director, Analytics
+44 207 397 0312
alex.rafferty@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644
james.peavy@ambest.com