AM Best Affirms Credit Ratings of Tower Limited
April 25 2024 - 9:47AM
Business Wire
AM Best has affirmed the Financial Strength Rating of A-
(Excellent) and the Long-Term Issuer Credit Rating of “a-”
(Excellent) 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.
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 very strong level at fiscal
year-end 2023 (30 September 2023). AM Best expects Tower’s
risk-adjusted capitalisation to remain at least at the very strong
level over the medium term. Despite a reduction in fiscal year (FY)
2023, the company’s regulatory solvency margin is expected to grow
over the medium term under the Interim Solvency Standard, supported
by internal retention of earnings. Other supporting factors include
strong financial flexibility, a prudent reinsurance programme and a
conservative investment strategy.
Tower’s operating performance is assessed as adequate,
demonstrated by a five-year weighted average return-on-equity (ROE)
ratio of 4.2% (FY 2019-2023). Over this period, operating earnings
were driven largely by technical performance coupled with modest
investment income. Tower reported an ROE ratio of -0.4% and a net
combined ratio of 103.2% in FY2023, mainly due to two large weather
events, the Auckland Anniversary Weekend floods and Cyclone
Gabrielle. The company’s expense ratio, which stood at
approximately 29% in FY2023, is expected to decrease over the
medium term as the company grows its premium base and improves
efficiency through IT transformation. AM Best expects Tower to
report positive underwriting and operating results over the medium
term, supported by appropriate risk selection, pricing and positive
investment returns.
Tower is a medium-size non-life insurer that operates
predominantly in New Zealand, with some operations in the Pacific
Islands. The company has a market share of 4% to 5% in New
Zealand’s general insurance market and gross written premiums of
NZD 511.5 million (USD 307.4 million) in FY2023. Tower’s core
product offerings are domestic home and motor insurance, typically
distributed through direct channels and partnerships.
Ratings are communicated to rated entities prior to
publication. Unless stated otherwise, the ratings were not amended
subsequent to that communication.
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual ratings
referenced in this release, please see AM Best’s Recent Rating
Activity web page. For additional information regarding the use and
limitations of Credit Rating opinions, please view Guide to Best’s
Credit Ratings. For information on the proper use of Best’s Credit
Ratings, Best’s Performance Assessments, Best’s Preliminary Credit
Assessments and AM Best press releases, please view Guide to Proper
Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specialising in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London,
Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more
information, visit www.ambest.com.
Copyright © 2024 by A.M. Best Rating
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Ken Lau Senior Financial Analyst +65 6303
5025 ken.lau@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310
christopher.sharkey@ambest.com
Yi Ding Senior Financial Analyst +65 6303
5021 yi.ding@ambest.com
Al Slavin Senior Public Relations Specialist +1
908 882 2318 al.slavin@ambest.com