The agency said the affirmations mainly reflected Tower’s favourable risk-adjusted capitalisation and good operating performance.
“TIL is currently maintaining a level of solvency capital that is significantly higher than its local minimum solvency capital,” AM Best said.
“In addition, the company’s risk-based capitalisation, as evaluated by Best’s Capital Adequacy Ratio (BCAR), is supported by adequate underwriting leverage, prudent reinsurance arrangement and conservative investments.”
It said the outlook would remain negative, however, reflecting the ‘potential financial consequences of the stated dividend policy’.
“Although AM 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.”
Tower CEO David Hancock welcomed the ratings affirmation.
“It supports the confidence our investors and customers have in Tower’s financial stability and security, while maintaining our respected financial position with our global reinsurance partners.
“Tower’s very strong solvency position has allowed the company to maintain its excellent credit rating while continuing with our 90-100% dividend payout policy and the $34 million share buy-back program, commenced earlier this month,” he said.
The news comes following the recent announcement of a new Australian CEO that will take-over the business in the coming months.
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