AM Best has affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb+” (Fair) of Quest Insurance Group Limited (Quest) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Quest’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM). The ratings also factor in the neutral impact from the company’s ultimate majority shareholder, Federal Pacific Group Limited.

Quest’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which was at the very strong level as of fiscal year-end (31 March) 2025, as measured by Best’s Capital Adequacy Ratio (BCAR). Prospectively, AM Best expects the company’s risk-adjusted capitalisation to remain at least at the strong level, supported by internal capital generation. AM Best still expects the company’s regulatory solvency position to remain appropriate, supported by prudent capital management. Offsetting balance sheet strength factors include the company’s small absolute capital base of NZD 21.8 million, which increases the sensitivity of the risk-adjusted capitalisation to stress scenarios, such as outsized dividend payments or fluctuations in prospective performance.

AM Best assesses Quest’s operating performance as adequate, supported by its robust underwriting performance and positive investment returns. In fiscal year 2025, the company reported a combined ratio (net/net, IFRS 17) of 89.5% and a return-on-equity ratio of 23.6%. Quest’s investment income remains a stable contributor to its overall profits, with the company reporting a net investment yield (including gains/losses) of 4.5% in fiscal year 2025. AM Best expects prospective performance to remain supportive of the adequate assessment over the near term, although the company’s rapid business growth and risk profile changes could drive potential volatility.

Quest’s business profile assessment of limited reflects its small market presence, geographic concentration and relatively niche product offering, largely as a provider of comprehensive vehicle insurance (CVI) and mechanical breakdown insurance (MBI) in New Zealand. The company’s scale of operation has increased significantly over the last five years, driven mostly by its third-party distributor of motor-related insurance. AM Best notes that Quest’s reliance on its third-party distributor has increased in recent years, with the related distribution channel accounting for over two-thirds of the gross premiums in fiscal-year 2025.

AM Best assesses Quest’s ERM as appropriate given the current size and complexity of its operations. Nonetheless, AM Best expects continual development of Quest’s ERM capabilities to support its growing operations and risk profile. Following the conclusion of a recent regulatory investigation, Quest was issued a formal warning letter over potential contraventions of the Insurance (Prudential Supervision) Act 2010, with no penalties imposed. The company has since engaged in a process to strengthen its risk management capabilities.

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

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