SINGAPORE–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” of Tower Limited (Tower) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Tower’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Tower’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which was at the strongest level in fiscal-year 2020 and is expected to remain at this level over the medium term. AM Best views Tower as having robust financial flexibility, a prudent reinsurance programme and a conservative investment strategy. Whilst the company’s balance sheet remains subject to ongoing loss exposure from the Canterbury earthquakes, AM Best views a recent settlement in respect of recoverables due from the Earthquake Commission to have reduced Tower’s risk exposure substantially in this area.
Tower has reported robust operating profits in fiscal-years 2019 and 2020, which is a notable improvement following operating losses in the prior four consecutive years (fiscal-years 2015 to 2018). Tower’s strengthened operating performance over recent years was driven primarily by increased stability in Canterbury Earthquake reserves and a largely benign environment for weather-related losses. Prospectively, AM Best expects Tower to report positive underwriting and operating results over the medium term, supported by appropriate risk selection and pricing, as well as through anticipated expense efficiencies achieved by core system upgrades in recent years.
AM Best views Tower’s business profile as neutral. The company is a medium-sized non-life insurer that operates predominantly in New Zealand, with some operations based in the Pacific Islands. Tower has a market share of approximately 4% in New Zealand’s general insurance market and reported gross written premium of NZD 377 million (USD 248 million) in fiscal-year 2020. The company’s core product offerings are domestic home and motor insurance, typically distributed through direct channels and partnerships.
AM Best views Tower’s ERM framework as developed and considers it to be appropriate given the size and complexity of its operations. The company’s risk management capabilities also are assessed to be robust and typically aligned with the profile of the company’s key risks.
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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