Union Medical Benefits Society Strengthens Market Position

Union Medical Benefits Society Limited Receives Strong Ratings

In the latest report from AM Best, Union Medical Benefits Society Limited (UniMed) has received impressive ratings, affirming its Financial Strength Rating of A (Excellent) and a Long-Term Issuer Credit Rating of 'a' (Excellent). These ratings come with a stable outlook, indicating a strong position in the health insurance market.

UniMed's Robust Financial Profile

The positive ratings from AM Best highlight UniMed’s very strong balance sheet strength. The assessment of the organization's risk-adjusted capitalisation, according to Best’s Capital Adequacy Ratio (BCAR), points to its position at the strongest level as of the end of June 2023. UniMed's financial stability is characterised by low underwriting leverage and moderate investment risk, ensuring a regulatory solvency position that significantly surpasses required thresholds.

Internal Capital Generation and Management

While the company is structured as a member-owned entity, which often limits financial flexibility, UniMed effectively addresses this through prudent capital management strategies and a history of strong internal capital generation. This careful management is crucial for maintaining operational efficiency and sustaining growth.

Performance Assessment: Adequate Yet Promising

Looking at UniMed’s operational efficiency, AM Best describes its performance as adequate, noting an average return-on-equity ratio of 4.7% over a five-year period. The combined ratio stood at 95.7% from fiscal years 2019 to 2023. Notably, the increase in operational performance pressure has stemmed from adverse claims experiences, with a recent combined ratio of 101.1% due to above-budget losses.

Remedial Actions and Future Expectations

Management has enacted remedial measures to enhance underwriting outcomes, including rate increases to manage loss ratios, which are anticipated to remain high in the near future. Despite these challenges, investment income is a significant contributor to UniMed’s operational results, reflecting a five-year average net investment return of 2.1%. AM Best remains optimistic that stringent pricing controls and robust yield from investments will sustain the company’s operating performance.

Strengthening Market Profile in New Zealand

AM Best’s recent reassessment of UniMed's business profile has upgraded it to neutral, reflecting improvements in their market position within New Zealand's health insurance sector. This shift follows the successful acquisition and integration of Accuro Health Insurance Society Limited’s insurance portfolio in fiscal-year 2024, marking a positive turn for UniMed.

Investing in Growth and Technology

UniMed is committed to ongoing advancements in both technology and marketing, aiming to facilitate growth and enhance customer retention. Although the organization operates primarily as a monoline insurer, its limited exposure to large losses aligns with a low product risk profile that is advantageous in maintaining overall stability.

Conclusion

The ratings extended to Union Medical Benefits Society Limited underline a well-managed entity with strong financial indicators and a strategic focus on growth. The combination of sound capital management, operational efficiency, and an emphasis on innovation positions UniMed to navigate challenges while continuing to serve its members effectively.

Frequently Asked Questions

What ratings did AM Best assign to UniMed?

AM Best affirmed that UniMed holds a Financial Strength Rating of A (Excellent) and a Long-Term Issuer Credit Rating of 'a' (Excellent) with a stable outlook.

How has UniMed's financial strength been assessed?

UniMed's financial strength is characterized by a strong balance sheet and a high level of risk-adjusted capitalisation per Best’s Capital Adequacy Ratio (BCAR).

What challenges is UniMed currently facing?

UniMed faces challenges from increased underwriting pressures due to adverse claims experiences, impacting their operational performance metrics.

What actions has UniMed taken to improve performance?

UniMed has implemented remedial measures including adjusting rates and enhancing its capital management strategies to improve underwriting performance.

How does UniMed's market profile influence its ratings?

A strengthened market profile in the New Zealand health insurance industry has positively influenced UniMed's business profile rating, leading to expectations of future growth.

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