S&P Sees Continued Profitability for NZ P/C Carriers

September 14, 2005

Profitability among New Zealand’s nonlife (P/C) insurers is expected to remain sound for the remainder of 2005 and into 2006, according to Standard & Poor’s latest report card on the sector.

“These insurers should maintain their solid underwriting profitability by sustaining technical premium rates, improving personal lines profitability, and leveraging off low industry expense positions,” stated S&P credit analyst Kate Thomson. “Some moderation, however, in profitability is possible due to rate reductions in commercial lines, intense competition for personal lines business, and troublesome storm activity,” she added.

S&P noted that its “assessment of industry risk for the New Zealand nonlife sector improved in early 2005, reflecting sustained operating profitability among participants, solid premium volume increases in the past two years after a period of stagnation, and strong Australian ownership and associated regulation.”

Thompson indicated: “Importantly, we believe that New Zealand’s exposure to natural disasters continues to be well managed through catastrophe reinsurance from offshore providers.”

S&P currently rates 25 nonlife insurers in New Zealand, with, it said, “a ratings distribution firmly skewed toward the strong rating categories (75 percent are rated ‘A’ category and above). An emerging sector is the small startup insurers (rated in the ‘B’ range) providing credit insurance and property-type insurance for customers of related finance companies.”

“Standard & Poor’s is proud of its 10-year service in New Zealand as an Approved Rating Agency under legislative requirements, and continues to provide ratings coverage on over 25 insurers in the local market,” observed credit analyst Michael Vine, Financial Services Ratings.

The report – “Industry Report Card: Nonlife Insurance–New Zealand-” is available on RatingsDirect, Standard & Poor’s Web-based credit analysis system, at: www.ratingsdirect.com. The report can also be found on Standard & Poor’s public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar select Commentary & News.

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