AM Best Affirms Credit Ratings of Momentum Life Limited
March 29 2023 - 9:33AM
Business Wire
AM Best has affirmed the Financial Strength Rating of B++
(Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) 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 a neutral impact 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. Although planned business
expansion is expected to drive increased capital requirements, AM
Best expects available capital to remain sufficient to support the
growth of underwriting operations over the medium term. In
addition, AM Best expects that there will be no requirement for
Momentum Life to upstream capital to settle an emerging contingent
liability at the group level. Partially offsetting the positive
balance sheet factor is Momentum Life’s small absolute capital
base, which increases its sensitivity to stress 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 with a five-year average return-on-equity ratio of 9.4%.
Since its inception as a capitalised insurer in 2018, Momentum
Life’s earnings have been constrained by a high expense ratio,
given its small premium base in its initial phase. However, the
company’s operating performance has been supported by the
favourable trail commission arising from insurance distribution
operations prior to 2018, as well as reinsurance commission income,
which have both partially offset outward acquisition costs during
the company’s initial growth phase. AM Best expects the company to
report 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 startup 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 fully underwritten term 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 its wholly owned subsidiary.
AM Best views Momentum Life’s ERM as appropriate given the size
and complexity of the company’s operations. The company’s risk
management capabilities have developed since its inception, with
compliance of regulatory and conduct risk requirements expected to
remain a key priority. AM Best considers continual risk management
developments as necessary to remain aligned with future changes in
Momentum Life’s risk profile, as the company increases its
operational scale.
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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Isaac Yeo Associate Financial Analyst +65 6303
5019 isaac.yeo@ambest.com Kanika Thukral Associate
Director, Analytics +44 207 397 0327
kanika.thukral@ambest.com Christopher Sharkey Associate
Director, Public Relations +1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com Al Slavin Senior Public
Relations Specialist +1 908 439 2200, ext. 5098
al.slavin@ambest.com