SINGAPORE, May 26 (Bernama-BUSINESS WIRE) -- A.M. Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Product Care (NZ) Limited (PCL) (New Zealand).
The revised outlooks reflect the company’s weakening solvency position and an unfavorable trend in underwriting performance. Based on recent financial results, the company’s underwriting profitability shows a downward trend, due to worse-than-expected claims experience emerging from its recently launched full replacement extended warranty cover.
The Credit Ratings (ratings) reflect PCL’s adequate risk-adjusted capitalization and conservative investment portfolio. Risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, remains marginally supportive of its current ratings. Despite poor claims experience in recent years, consistent investment income has helped offset volatility and absorb the negative underwriting results, thus contributing to overall positive results.
The outlooks could be revised back to stable if the company can reverse its poor underwriting performance trend. Negative rating actions could arise if PCL’s capital position further erodes or the unfavorable earnings trend persists. Furthermore, negative rating actions could occur if the consolidated financial performance of its ultimate parent deteriorates.
The Credit Ratings (ratings) reflect PCL’s adequate risk-adjusted capitalization and conservative investment portfolio. Risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, remains marginally supportive of its current ratings. Despite poor claims experience in recent years, consistent investment income has helped offset volatility and absorb the negative underwriting results, thus contributing to overall positive results.
The outlooks could be revised back to stable if the company can reverse its poor underwriting performance trend. Negative rating actions could arise if PCL’s capital position further erodes or the unfavorable earnings trend persists. Furthermore, negative rating actions could occur if the consolidated financial performance of its ultimate parent deteriorates.
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