Tower's Medical business marked
Thursday, September 6th 2012, 4:01PM
A.M. Best Assigns Ratings to TOWER Medical Insurance Limited
A.M. Best Co. has assigned a financial strength rating of A- (Excellent) and an issuer credit rating of “a-” to TOWER Medical Insurance Limited (TMI) (New Zealand). The outlook assigned to both ratings is stable.
TMI operates solely in New Zealand, and its principal activity consists of providing medical insurance and reinsurance services to TOWER Health & Life Limited (THL). TMI is a health insurance company wholly owned by THL, which in turn is ultimately owned by TOWER Limited. TOWER Limited is listed on the stock exchanges in Australia and New Zealand and conducts business in New Zealand and the Pacific Islands.
Currently, the majority of TOWER Limited’s health insurance business is written by THL, which is fully reinsured by TMI. TMI has a small book of health insurance business (less than 10% of premium revenue), which it owns directly. However, as part of TOWER Limited’s move to have TMI as a licensed insurer under New Zealand’s insurance prudential supervision regime, beginning October 1, 2012, TMI will be restructured as a direct health insurer, and THL will exclusively concentrate on pure risk life insurance.
The ratings of TMI reflect its adequate capitalization, favorable operating results and consistent underwriting and investment performances.
TMI’s risk-based capitalization, as evaluated by Best’s Capital Adequacy Ratio (BCAR), is adequate and supportive of its current ratings. A reliable stream of underwriting income has been a key contributor, followed by net investment income. Operating performance is favorable, as demonstrated by its five-year operating ratio of 88%. The operation also has demonstrated consistency in sustaining positive underwriting and investment results in each of the past six years. A.M. Best believes that TMI will be able to maintain its adequate capitalization through retained earnings.
Partially offsetting these positive rating factors is the company’s moderate, albeit reduced, underwriting leverage.
As of September 30, 2011, TMI’s premium leverage was approximately 2.44 times surplus, which is higher than its peers. This makes the capitalization relatively more sensitive to unexpected shocks in underwriting results.
A.M. Best believes that TMI is well positioned to maintain its positive operating results, despite increased competition in the health insurance industry. However, if economic factors lead to the company incurring underwriting losses, or if there is a significant deterioration in its risk-adjusted capitalization, the outlook and/or ratings could be pressured.
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