A.M. Best Co. has affirmed the financial strength rating of B+ (Very Good) of Tasman Pacific Insurance Limited (Tasman) (New Zealand). The outlook is stable.
The rating reflects Tasman’s prudent capitalization, improved operating performance and strong profitability in its insurance business underwritten. The rating also considers the company’s well established distribution support from its affiliated company, Provincial Finance Limited.
The Best’s Capital Adequacy Ratio (BCAR), which measures capitalization on a risk-adjusted basis, demonstrates that the company is moderately capitalized. The capital and surplus increased by 128.2% in fiscal year 2004, compared to 97.3% in fiscal year 2003. This is further supported by the significant reduction of its affiliated investment.
Tasman’s gross premium income increased to NZD 10.2 million (USD 6.7 million) in fiscal year 2004, from NZD 4.5 million (USD 2.5 million) in fiscal year 2003. The company continues to benefit from its arrangement with Provincial Finance Limited to distribute its insurance plans over the year. The net premium leverage ratio has marginally improved to 2.95 times in fiscal year 2004 from 3.01 times in fiscal year 2003.
These positive factors are partially offset by Tasman’s aggressive investment policy, the concentration of risk in its business profile and its heavy dependence upon its affiliate for future new business growth.
As of fiscal year 2004, 78.4% of Tasman’s total assets were allocated to equities, with only 1.3% of its assets in cash and 8.4% in government or other fixed interest securities. The relatively large equity exposure position is anticipated to contribute high volatility to Tasman’s operating results going forward.
With the low entry barrier of new players into the consumer finance market, Tasman is faced with challenges to maintain its market share and its profitability level. The company’s business profile lacks diversity in comparison with the profiles of its competitors, which might limit its future business growth potential.
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