AM Best has affirmed that Quest Insurance Group (New Zealand) is expected to maintain its risk-adjusted capitalisation at a very strong level, bolstered by a prudent capital management policy. This policy ensures that dividends are distributed only when there is a sufficient buffer in the company’s regulatory solvency capital.
As of March 31, 2024, Quest’s balance sheet strength reflects its risk-adjusted capitalisation, which is reported to be at its highest level according to the Best’s Capital Adequacy Ratio (BCAR). The company is poised to sustain this strong capitalisation, continuing its conservative strategy that restricts dividend payments to instances where a robust solvency buffer is in place.
Despite this strong capital position, Quest’s capital quality is somewhat undermined by a significant affiliated asset and a relatively small absolute capital base of NZ$2.6 million (US$1.58 million), rendering it more susceptible to adverse stress scenarios.
The operating performance of Quest Insurance is characterized as adequate, driven by robust underwriting results and favorable investment returns. The company reported a combined ratio of 84.0% for fiscal 2024, a decline from the previous year’s ratio of 88.8%. However, projections indicate that future loss ratios may increase, particularly due to rapid growth in the less profitable comprehensive vehicle insurance (CVI) sector.
AM Best regards Quest’s enterprise risk management (ERM) framework as suitable for its size and complexity. Nonetheless, the company faces heightened underwriting and execution risks associated with its recent expansion efforts. These risks are managed through vigilant performance monitoring and a conservative stance on pricing and reserve allocations.
(Note: Currency conversion rate is $1.00 = NZ$1.64.)
