capital adequacy
capital adequacy

AM Best Downgrades Credit Ratings of Accuro Health Insurance Society Limited

SINGAPORE, April 28, 2023–(BUSINESS WIRE)–AM Best has downgraded the Financial Strength Rating (FSR) to B (Fair) from B+ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bb” (Fair) from “bbb-” (Good) of Accuro Health Insurance Society Limited (Accuro) (New Zealand). The outlooks of these Credit Ratings (ratings) have been revised to stable from negative.

The ratings reflect Accuro’s balance sheet strength, which AM Best assesses as weak, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The rating downgrades reflect a deterioration in AM Best’s view of Accuro’s balance sheet fundamentals. The company’s risk-adjusted capitalisation for fiscal-year ended 31 August 2022, as measured by Best’s Capital Adequacy Ratio (BCAR), fell to adequate from strong at the previous year end. Accuro’s risk-adjusted capitalisation is expected to fall to the weak level over the near term, primarily as a result of underwriting growth outpacing the growth in tangible capital. The company has undertaken a substantial investment to upgrade its policy administration system in recent years, which gave rise to material intangible assets relative to its capital base of NZD 11.8 million as of 31 August 2022. Accuro’s prospective capital adequacy is highly sensitive to changes in the development and implementation costs arising from this infrastructure investment, as well as to variations in future earnings.

AM Best expects Accuro’s regulatory solvency position to remain appropriate, although the company is expected to record a weaker solvency position than previously indicated at fiscal year-end 2023, due to a cyber incident that adversely impacted its cashflow position. AM Best considers Accuro’s financial flexibility to be limited, given its status as a member-owned organisation. However, the company has the ability to make rate adjustments on relatively short notice to support profitability, if required.

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