Tower Financial Strength Rating Affirmed as A- (Excellent)

11 March 2019

Market Information Company Announcements Office
NZX Limited Australian Securities Exchange Limited
Level 2, NZX Centre Exchange Centre
11 Cable Street Level 6, 20 Bridge Street
Wellington Sydney NSW 2000
New Zealand Australia


Tower rating reaffirmed as A- (Excellent)

Global insurance company ratings specialist A.M. Best Company has reaffirmed Tower Insurance
Limited’s (TIL) financial strength rating as A- (Excellent), with a stable outlook, reflecting Tower’s
strong balance sheet, continued adequate performance and solid reinsurance approach.

The company’s issuer credit rating was also affirmed as “a-“. In its announcement, A.M. Best
Company noted that the rating reflects TIL’s balance sheet being very strong along with the
company’s adequate operating performance, neutral business profile and appropriate enterprise
risk management.

Tower Chairman Michael Stiassny welcomed the confirmation from A.M. Best.

“A.M. Best’s announcement confirms our view that the transformation of Kiwi insurer Tower is
delivering results and that the business is strong and performing well.”

A copy of the A.M. Best Company’s news release is attached.


ENDS


Richard Harding
Chief Executive
Tower Limited
ARBN 088 481 234 Incorporated in New Zealand


For media queries, please contact:
Nicholas Meseldzija
Head of Corporate Communications
Tower Limited
Mobile: +64 21 531 869
Email: nicholas.meseldzija@tower.co.nz

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Press Release - MARCH 08, 2019
AM Best Affirms Credit Ratings of TOWER
Insurance Limited and TOWER Limited
CONTACTS:
Yi Ding
Financial Analyst
+65 6303 5021
yi.ding@ambest.com
Myles Gould
Associate Director, Analytics
+65 6303 5020
myles.gould@ambest.com
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com
FOR IMMEDIATE RELEASE
SINGAPORE - MARCH 08, 2019
AM Besthas affirmed the Financial Strength Rating of A- (Excellent)
and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” of
TOWER Insurance Limited (TIL) (New Zealand). Concurrently, AM Best
has affirmed the Long-Term ICR of “bbb-” of TIL’s ultimate parent,
TOWER Limited (TL) (New Zealand). The outlook of these Credit
Ratings (ratings) remains stable.
The ratings reflect TIL’s balance sheet strength, which AM Best
categorizes as very strong, as well as its adequate operating
performance, neutral business profile and appropriate enterprise risk
management.
TIL’s balance sheet strength is underpinned by its risk-adjusted
capitalization, which AM Best expects to remain at the very strong level
over the medium term, as measured by Best’s Capital Adequacy Ratio
(BCAR). AM Best also views TIL as having strong financial flexibility as
a result of its ownership by TL, a listed company with the ability to
access capital markets and raise external debt. TL injected NZD 35
million of capital into TIL in fiscal-year 2017, in order to bolster its
regulatory solvency position. Other positive balance sheet
considerations include the company’s conservative investment strategy
and prudent reinsurance arrangements. A partially offsetting balance
sheet factor remains the company’s exposure to the Canterbury
Earthquakes that occurred in 2010 and 2011, which have since led to a
series of reserve strengthening actions. As of September 2018, TIL held
total net provisions of NZD 62 million for these events. Prospective
capital adequacy could, however, be impacted negatively by further
unfavorable development of these provisions, new claim notifications or
lower-than-expected Earthquake Commission recoverables.
TIL has reported operating losses in each of the past four years (fiscal-
years 2015-2018), driven by adverse development on its Canterbury
earthquake claims. In addition, an NZD 22 million write-off of
reinsurance recoverables and several weather-related events in New
Zealand and the Pacific Islands have hampered technical results over
the past two years. However, TIL’s combined ratio has exhibited a
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gradual improvement over recent years, and AM Best expects the
company to report positive technical and overall earnings from fiscal-
year 2019 onward. This expected improvement is taken into account in
the assessment of TIL’s operating performance as adequate.
AM Best views TIL’s business profile as neutral. The company is a
medium-sized insurer that operates predominantly in New Zealand, with
some operations based in the Pacific Islands. TIL has a market share of
4% in New Zealand’s general insurance market. TIL’s core product
offerings are home and motor insurance, with a significant portion of the
company’s business sourced from direct marketing and partnerships.
TL is a non-operating holding company, and the level and the Long-
Term ICR outlook reflect standard notching from the ratings of TIL,
which is its lead insurance subsidiary.
Ratings are communicated to rated entities prior to publication.
Unless stated otherwise, the ratings were not amended
subsequent to that communication.
This press release relates to Credit Ratings that have been
published on AM 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 see AM Best’s Recent Rating
Activity web page. For additional information regarding the use
and limitations of Credit Rating opinions, please view
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