NEW ZEALAND’S TOWER CREDIT RATINGS AFFIRMED EXCELLENT - AM BEST

KUALA LUMPUR, April 26 (Bernama) -- Global credit rating agency, AM Best has affirmed New Zealand’s Tower Limited (Tower) financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent).

In a statement, AM Best said these credit ratings (ratings) which have a stable outlook, reflected Tower’s balance sheet strength, was assessed 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, which was at the very strong level at fiscal year ending September 2023, as measured by Best’s Capital Adequacy Ratio.

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.

Tower’s operating performance is assessed as adequate, demonstrated by a five-year weighted average return-on-equity (ROE) ratio of 4.2 per cent (FY 2019-2023), in which operating earnings were driven largely by technical performance coupled with modest investment income.

However, the company reported a 0.4 per cent decrease in ROE ratio and a net combined ratio of 103.2 per cent 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 per cent in FY2023, is expected to decrease over the medium term as the company grows its premium base and improves efficiency through information technology (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.

A medium-size non-life insurer that operates predominantly in New Zealand, with some operations in the Pacific Islands, Tower’s core product offerings are domestic home and motor insurance, typically distributed through direct channels and partnerships.

-- BERNAMA