AM Best Affirms B++ (Good) Credit Ratings of Momentum Life Limited
Published on Tue Apr 4 2023 in News
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.
About AM Best
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.
About Momentum Life
Momentum Life is a licensed life insurance company, providing direct-to-consumer insurance solutions to New Zealanders. Their mission is to put customers’ needs first, by making insurance simple, accessible and affordable at every stage of life.
Momentum Life is also a proud supporter of Heart Kids, the only charity in New Zealand dedicated to providing lifelong care and support for children and families living with childhood heart defects. A portion of all Momentum Life’s first-year insurance premiums is donated to support the valuable work of Heart Kids.
To learn more please visit momentumlife.co.nz.
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The content provided in this article is for information purposes only. The information is of a general nature and does not constitute financial advice or other professional advice. To the extent that any of the content constitutes financial advice, it is limited to Momentum Life products only and does not consider your specific financial needs or goals. You should consider whether the information is appropriate for you and seek independent professional advice, if required.
All product information is correct at the time this article was published. For current product information, please visit the Momentum Life website.