AM Best has affirmed the A- (Excellent) financial strength rating and “a-“ (Excellent) long-term issuer credit rating of Tower Limited, describing its outlook on both ratings as stable.

Having settled the majority of claims arising from the Canterbury earthquake, Tower’s underwriting profits notably improved over the past three years, with its combined ratio remaining below 95%. AM Best assessed Tower’s operating performance as adequate. It expected continued positive underwriting and operating results considering core system upgrades undertaken by Tower in recent years which would achieve anticipated expense efficiencies.

It assessed Tower’s balance sheet strength as very strong, supported by a risk-adjusted capitalisation, which was at its strongest at fiscal year-end 2021, and expected Tower to maintain an elevated dividend payout ratio and sufficient retained earnings to support new business growth and regulatory solvency coverage.

AM Best considered Tower as having strong financial flexibility, a prudent reinsurance programme and a conservative investment strategy.

The rating agency described Tower as a medium-sized, non-life insurer with a market share of around 5% in New Zealand’s general insurance market and reported gross written premium of $405m in fiscal year 2021. Its core product offerings are domestic home and motor insurance.

Tower’s risk management capabilities also received high marks, with AM Best assessing them as robust and typically aligned with the profile of the company’s key risks.