A.M. Best Affirms Ratings of TOWER Limited and TOWER Insurance Limited

SINGAPORE--(BUSINESS WIRE)-- A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit ratings (ICR) of “a-” of TOWER Insurance Limited (TIL). A.M. Best also has affirmed the ICR of “bbb-” of the ultimate parent, TOWER Limited (TL). The outlook for all ratings remains negative. All companies are domiciled in New Zealand.

The rating affirmations mainly reflect TIL’s favorable risk-adjusted capitalization and good operating performance.

TIL is currently maintaining a level of solvency capital that is significantly higher than its local minimum solvency capital. In addition, the company’s risk-based capitalization, as evaluated by Best's Capital Adequacy Ratio (BCAR), is supported by adequate underwriting leverage, prudent reinsurance arrangement and conservative investments.

Over a five-year period, TIL’s underlying net profits (excluding reserve strengthening and disposal of subsidiaries) remained consistently positive, benefiting from stable net investment yields, as well as a generally profitable book in New Zealand and Pacific Islands. The company’s combined and operating ratios, on average, were reported at 96% and 91%, respectively.

The outlook remains negative, reflecting the potential financial consequences of the stated dividend policy. Although A.M. Best expects TIL to continue delivering good operating performance, the company has a dividend guidance to distribute 90-100% of its earnings as dividends. Prospectively, while the level of capital is expected to remain flat, as the company’s premium revenue continues to grow, the growth of premium revenue will likely outpace the growth of capital, thereby leading to higher premium to capital ratio and thinner capital buffer under BCAR analysis.

The ratings and outlook of TL recognize the standard notching from TIL, its primary operating entity.

The ratings of TIL may be downgraded should the company’s underwriting leverage continue to rise or operating trends begin to deteriorate significantly. Additionally, TIL’s ratings may experience downward pressure if TL becomes excessively leveraged on a consolidated basis.

Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150724005493/en/

A.M. Best
Jason Shum, +65-6589-8400, ext. 217
Financial Analyst
[email protected]
or
Chi-Yeung Lok, +65-6589-8400, ext. 211
Senior Financial Analyst
[email protected]
or
Christopher Sharkey, +(1) 908-439-2200, ext. 5159
Manager, Public Relations
[email protected]
or
Jim Peavy, +(1) 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Company, Inc.

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