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), which was formerly known as Tower Insurance Limited. The outlook of these Credit Ratings (ratings) is stable. Concurrently, AM Best has withdrawn the Long-Term ICR of the Tower group’s prior non-operating holding company, Tower Limited (TL) (New Zealand), which ceased to exist as part of a corporate restructure on 30 September 2020.
These rating actions follow the execution of a short-form amalgamation of the non-operating holding company, TL, and two other non-rated group entities into Tower Insurance Limited on 30 September 2020. Tower Insurance Limited is the continuing operating insurance company and has subsequently changed its legal name to Tower Limited (Tower). This transaction was aimed at simplifying the group’s corporate structure and has received regulatory approval from the Reserve Bank of New Zealand.
The ratings of Tower reflect its balance sheet strength, which AM Best categorises 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 categorised as strongest in fiscal-year 2019 and is expected to remain at this level following the recent amalgamation. AM Best also views Tower as having robust financial flexibility, a prudent reinsurance programme and a conservative investment strategy. A partial offsetting factor remains the ongoing exposure to the Canterbury earthquakes, including the potential for adverse reserve development and lower-than-expected recoverables from the Earthquake Commission.
Tower reported a return-on-equity ratio of 9.8% and a combined ratio of 94.3% for fiscal-year 2019. 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.
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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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