Oldwick, N.J. (BUSINESS WIRE) - A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Tower Insurance Limited (Tower Insurance) (New Zealand).
The outlook for both ratings remains stable.
The affirmation of the ratings reflects Tower Insurance's improving operating performance and moderate risk-adjusted capitalization.
The improving trend in Tower Insurance's underwriting results suggests that turnaround strategies are finally yielding the desired results. Underwriting profits were NZD 9.4 million (USD 7.1 million) in fiscal year 2007 compared to NZD 7.1 million (USD 4.6 million) the previous year. The loss ratio in fiscal year 2007 improved to 63.8% from 65.6% in fiscal year 2006. Expense increases, which were offset by improving claims experience, together with strong investment earnings resulted in net income increasing by 58% during the year.
Although Tower Insurance's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), was weaker in fiscal year 2007, it remains at a level commensurate with its ratings. An improvement in BCAR driven by increased asset risk and retention of operating earnings was offset by the changes of risk retention on the underlying layer of Tower Insurance's catastrophe program. The net premium leverage improved to 1.5 times in fiscal year 2007 from 1.6 times in fiscal year 2006.
Tower Insurance has maintained a competitive position in New Zealand and other Pacific regions. Through its strategic alliance with banks, financial institutions and direct sales distribution channels, Tower Insurance achieved stable growth in gross premiums written in recent years.
Other rating factors include Tower Insurance's exposure to catastrophic perils and distribution risk.
Weather-related events have caused volatility in Tower Insurance's profitability in recent years. Risks in the Pacific have additional exposures to political and social instability. While insurers operating in the region are faced with similar challenges, A.M. Best believes that Tower Insurance's risk management strategy somewhat mitigates these concerns.
Tower Insurance has maintained strong strategic alliance partnerships with banks and other financial institutions.
However, despite the progress made at diversifying its distribution, its exposure to a single alliance partner remains.
For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.
For more information, visit www.ambest.com.
A.M. Best Co.AnalystsPhilip Chung, CFA, +852-2827-3409 philip.chung@ambest.com or Terrence Wong, +852-2827-3403 terrence.wong@ambest.com or Public RelationsJim Peavy,+1-908-439-2200, ext. 5644 james.peavy@ambest.com or Rachelle Morrow,+1-908-439-2200, ext. 5378 rachelle.morrow@ambest.com
The affirmation of the ratings reflects Tower Insurance's improving operating performance and moderate risk-adjusted capitalization.
The improving trend in Tower Insurance's underwriting results suggests that turnaround strategies are finally yielding the desired results. Underwriting profits were NZD 9.4 million (USD 7.1 million) in fiscal year 2007 compared to NZD 7.1 million (USD 4.6 million) the previous year. The loss ratio in fiscal year 2007 improved to 63.8% from 65.6% in fiscal year 2006. Expense increases, which were offset by improving claims experience, together with strong investment earnings resulted in net income increasing by 58% during the year.
Although Tower Insurance's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), was weaker in fiscal year 2007, it remains at a level commensurate with its ratings. An improvement in BCAR driven by increased asset risk and retention of operating earnings was offset by the changes of risk retention on the underlying layer of Tower Insurance's catastrophe program. The net premium leverage improved to 1.5 times in fiscal year 2007 from 1.6 times in fiscal year 2006.
Tower Insurance has maintained a competitive position in New Zealand and other Pacific regions. Through its strategic alliance with banks, financial institutions and direct sales distribution channels, Tower Insurance achieved stable growth in gross premiums written in recent years.
Other rating factors include Tower Insurance's exposure to catastrophic perils and distribution risk.
Weather-related events have caused volatility in Tower Insurance's profitability in recent years. Risks in the Pacific have additional exposures to political and social instability. While insurers operating in the region are faced with similar challenges, A.M. Best believes that Tower Insurance's risk management strategy somewhat mitigates these concerns.
Tower Insurance has maintained strong strategic alliance partnerships with banks and other financial institutions.
However, despite the progress made at diversifying its distribution, its exposure to a single alliance partner remains.
For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.
For more information, visit www.ambest.com.
A.M. Best Co.AnalystsPhilip Chung, CFA, +852-2827-3409 philip.chung@ambest.com or Terrence Wong, +852-2827-3403 terrence.wong@ambest.com or Public RelationsJim Peavy,+1-908-439-2200, ext. 5644 james.peavy@ambest.com or Rachelle Morrow,+1-908-439-2200, ext. 5378 rachelle.morrow@ambest.com
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