SINGAPORE–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of DPL Insurance Limited (DPL) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect DPL’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also factor in a neutral impact from the company’s ultimate ownership by Turners Automotive Group Limited (Turners), a motor vehicle retailer and financial services group in New Zealand.
DPL’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 as of fiscal year-end 2022. In addition, AM Best expects the company’s risk-adjusted capitalisation to remain at the strongest level prospectively, supported by controlled underwriting growth and appropriate retention of earnings. AM Best views DPL’s investment strategy to be balanced, with the majority of investment assets held in term deposits, albeit with a notable exposure to illiquid assets including investment properties. A partially offsetting balance sheet factor remains the significant volume of intangible assets arising from the company’s acquisition of Autosure’s insurance business in 2017, including goodwill items relating to the brand name and acquired agency relationships.
AM Best views DPL’s operating performance to be adequate. The company reported a five-year average return-on-equity ratio of 12.6% (fiscal years 2018-2022), supported by a combination of solid underwriting profits and robust investment returns. Technical performance has exhibited an improving trend over the past five years, primarily driven by DPL’s initiatives to enhance pricing and risk selection for its core insurance products, and the positive impact of the COVID-19 pandemic on the claims frequency of motor-related lines of business in recent periods. In addition, investment in information technology and systems has contributed to improved operational efficiency and lower management expenses over the past few years. DPL reported an average net investment yield (excluding gains and losses) of 3.1% over the past five years (fiscal years 2018-2022).
AM Best views the company’s business profile as limited given its niche and relatively modest scale of operations. DPL’s ownership and affiliation with its parent, Turners, which is the largest retailer of used motor vehicles in New Zealand, provides good access to business and creates a valuable distribution network. In recent years, the company’s premium growth has been impacted by fluctuations in used car sales due to the COVID-19 pandemic. However, prospective premium growth is expected to increase as a result of market recovery and the company’s sales initiatives.
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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