Rob Hennin, nib CEO
Rob Hennin, nib CEO
S&P says nib NZ is the second-largest provider of health insurance products in the New Zealand market and it accounts for more than 20% of the capital of its Australian parent company.
"The ratings on nib NZ reflect the insurer's...sound competitive position and sound capital and earnings."
The SACP includes a favorable one-notch holistic adjustment to reflect our view that the risks associated with the insurer's small capital base are offset--but not eliminated--by the New Zealand public hospital and Accident Compensation (ACC) limiting nib NZ's exposure to accident and pandemic risk. The adjustment also factors in peer rating relativities."
"The rating captures our view that the insurer is integral to the strategy of nib Holdings Ltd., such that its creditworthiness is equalised to that of the group.
The ratings on nib NZ reflect our view that the subsidiary can effectively compete in the relatively small and stable New Zealand health insurance market. Its market share of 15% by lives covered has experienced strong growth
in recent years, primarily from the acquisition of Onepath Life (NZ) Ltd.'s health insurance book in 2015 but also from organic growth through its direct-to-consumer channel.
We view nib NZ's operating performance as favorable because it generates returns in excess of most peers, assisted by its relatively low health loss ratio and younger average customer age relative to peers. This supports the
financial strength of the organization and we expect it to maintain sound capital and earnings over our ratings horizon of two to three years. The conservative allocation of its investment portfolio and healthy overall level
of capital also underpin its creditworthiness.
S&P often marks down small health insurers (on a global scale) because they could be susceptible to one-off shocks. Hower, S&P considers nib NZ's parent, is "likely to support the subsidiary under all foreseeable circumstances within our rating horizon of three years."
The stable outlook on nib NZ reflects S&P's expectation that the group's creditworthiness will remain stable over the next two to three years.
It would raise the rating if the group's creditworthiness strengthens over the next two to three years.
Likewise it would make changes if the competitive position of nib NZ materially increases, for example, if it develops a differentiated brand and reputation that provide a competitive advantage relative to competitors or if it sources the majority of total premium through controlled channels, or capital grows materially.
Downward ratings momentum could occur if nib NZ becomes less integral to the wider group over the next two to three years.
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