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AM Best Revises Outlooks to Negative for Consumer Insurance Services Limited

May 17, 2019 GMT


AM 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 Consumer Insurance Services Limited (CISL) (New Zealand).

The negative Credit Rating (rating) outlooks reflect the company’s diminishing business profile as a result of commencing to run off its insurance operations during 2019, as well as the increased potential for regulatory and operational risks arising from ongoing regulatory reviews surrounding the conduct and culture in New Zealand’s insurance market, in addition to product value creation.


The ratings reflect CISL’s balance sheet strength, which AM Best categorizes as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM). The ratings also factor in a neutral impact from the company’s ultimate majority ownership by FlexiGroup Limited.

CISL’s balance sheet strength is underpinned by the company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which is categorized as strongest. Despite the company entering into a run-off status during 2019, AM Best expects capital adequacy to remain at the strongest level over the medium term, supported by a gradual decline in underwriting risks and continued robust internal capital generation. A partially offsetting balance sheet factor is CISL’s very small absolute capital base, which increases its sensitivity to stressed scenarios.

AM Best considers CISL’s operating performance to be adequate. The company has reported a five-year average return on equity ratio of 30% (fiscal-years 2014 to 2018), albeit with moderate volatility in some years. The company’s operating results over the past five years have been driven by favorable claims experience from its sole product offering of credit card repayment protection insurance. The company’s five-year average combined ratio for fiscal-years 2014 to 2018 was 66%. Prospectively, AM Best expects underwriting performance to show a deteriorating trend, following the planned implementation of several product coverage enhancements for all existing policyholders. Despite these product adjustments, AM Best expects CISL’s underwriting and operating performance to remain at an adequate level over the medium term.

AM Best views CISL’s business profile as limited, reflecting its small scale of operations and niche position as a provider of credit card repayment protection for cardholder customers of its parent, FlexiGroup (New Zealand) Limited. The company ceased writing new business from November 2018 and renewal business from April 2019. AM Best expects CISL’s existing policyholder obligations to run off over the course of approximately five years.


AM Best views the company’s ERM framework to be appropriate given the current size and complexity of its operations. AM Best continues to monitor the impact of regulatory challenges in relation to product value creation, as well as conduct and culture in New Zealand’s insurance market. Any resulting increase in regulatory or operational risk for CISL likely will drive a mismatch between the company’s risk management profile and capability.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings . For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases .

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Financial Analyst

+65 6303 5021

yi.ding@ambest.comChristopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.comMyles Gould

Associate Director, Analytics

+65 6303 5020

myles.gould@ambest.comJim Peavy

Director, Public Relations

+1 908 439 2200, ext. 5644





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PUB: 05/17/2019 12:08 PM/DISC: 05/17/2019 12:08 PM