AM Best has affirmed Tower Ltd.’s Financial Strength Rating at A- (Excellent) and its Long-Term Issuer Credit Rating at “a-” (Excellent), both with a stable outlook, following its latest annual review of the New Zealand general insurer.
The rating agency said Tower’s ratings continue to reflect balance sheet strength that it assesses as “very strong,” together with “adequate” operating performance, a neutral business profile, and “appropriate” enterprise risk management. Tower’s balance sheet assessment is based on risk-adjusted capitalisation measured at the strongest level under Best’s Capital Adequacy Ratio at the close of the 2025 financial year on Sept. 30, 2025. AM Best expects Tower’s risk-adjusted capitalisation to remain at least at the “very strong” level over the medium term, supported by retained earnings. The agency also expects Tower’s regulatory solvency capital to remain above minimum requirements. Factors cited in support of the balance sheet assessment include financial flexibility, a reinsurance programme described by AM Best as prudent, and a conservative investment strategy.
On performance, AM Best noted that Tower has produced an “adequate” operating record, with results affected at times by catastrophe losses. Earnings are driven mainly by technical results and investment income. For FY25, Tower reported a return on equity of 23.5% and a net/net combined ratio of 81.4%. AM Best said it expects Tower to continue to report positive underwriting and operating results over the medium term, supported by risk selection, pricing, and investment returns. Tower writes predominantly non-life business in New Zealand, with additional business in Pacific markets. Its core product lines include domestic home and motor insurance, distributed primarily through direct channels and partnerships. The insurer’s overall non-life market share is about 5%, with established positions in its main product segments in the New Zealand market.
AM Best assesses Tower’s enterprise risk management framework as appropriate for its risk profile. The agency highlighted regulatory compliance as a continuing focus, in the context of changes in New Zealand’s conduct and prudential environment. A recent investigation by the Financial Markets Authority (FMA), initiated after Tower self-reported issues, found historical misleading representations that led to a court-ordered penalty. Tower is carrying out customer remediation programmes and making changes to internal controls and oversight processes. Tower chair Naomi Ballantyne said the outcome of the AM Best review is consistent with the insurer’s approach to capital and risk. “Tower is well-positioned to continue delivering on its growth strategy and to deliver long-term returns for shareholders,” Ballantyne said.
The rating affirmation comes after Tower released its results for the year ended Sept. 30, 2025. Underlying net profit after tax was $107.2 million, compared with $83.5 million in FY24, while reported profit rose to $83.7 million from $74.3 million. Tower said the FY25 result was influenced by lower large event costs, a reduced business-as-usual claims ratio, and growth in customer numbers. Gross written premium increased 2% to $600 million, and customer numbers rose 4% to 318,000. The BAU claims ratio fell to 41% from 48%, and the combined operating ratio improved to 74.1% from 79%. The management expense ratio remained at 31.4%. The board declared a fully imputed final dividend of 16.5 cents per share, taking total dividends for FY25 to 24.5 cents per share.
Chief executive Paul Johnston linked the earnings outcome to changes made across the business in recent years. “This is an exceptional result, underpinned by Tower’s transformation, driven by investment in our digital platform and continued focus on underwriting discipline, technology, data, and efficiency. These actions demonstrate Tower’s commitment to delivering sustainable growth and building a resilient, customer-focused business for the future. However, it is worth noting that we expect conditions that influenced the FY24 and FY25 results, such as relatively benign weather, and prior-year rating flowing through the portfolio, to normalise in the coming year,” Johnston said.
For FY26, Tower has guided to underlying NPAT in the range of $55 million to $65 million, based on full utilisation of an updated $45 million large events allowance. The insurer expects GWP growth of 5% to 10%, supported by customer growth and distribution agreements. One of these is a new partnership with Westpac New Zealand under which Tower will provide general insurance products to the bank’s retail customers from July 2026. The arrangement is expected to add a further retail channel in the domestic market. Tower anticipates additional efficiency gains from digitisation and process change, while continuing to invest in growth, technology, and customer experience. The company expects the management expense ratio to remain in the 31% to 32% range in FY26.
