PICL to sustain a strong capital level amidst growth: AM Best

However, long-duration policies in PICL's portfolio pose reserving risks.

New Zealand-headquartered Provident Insurance Corp. (PICL) is expected to sustain its improvement in its risk-adjusted capitalisation and operational stability, amidst an improved balance sheet, AM Best said.

Over the medium term, PICL’s capitalisation is expected to remain at least at the "strong" level, supported by internal capital generation and moderated by planned partial share redemptions and business growth targets. 

Additional strengths include a conservative investment strategy and a robust regulatory solvency position. 

However, AM Best noted the long-duration policies in PICL's portfolio pose reserving risks, though these are mitigated by prudent practices and a history of reserve adequacy.

Operating performance is also deemed adequate, driven by profitable underwriting and strong investment returns. 

For fiscal year 2024, PICL achieved a return-on-equity ratio of 15.2% and a combined ratio of 96.9%, as calculated under IFRS 17. 

Whilst elevated expenses were recorded during the period due to investments in information technology and pricing systems, AM Best anticipates the expense ratio to normalise as these initiatives support accelerated growth plans.

AM Best considers PICL’s enterprise risk management (ERM) framework appropriate for its operational complexity. 

Whilst the execution of its growth strategy presents ongoing challenges, the company’s investments in internal capabilities and technology have mitigated these risks. 

Going forward, AM Best expects further development of PICL’s risk management processes to align with its expanding scale.