SINGAPORE--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of DPL Insurance Limited (DPL) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect DPL’s adequate risk-adjusted capitalization and positive operating results, underpinned by strong investment earnings.
In fiscal year 2016, DPL’s ultimate parent, Turners Automotive Group Limited (Turners), acquired the Autosure insurance business from Suncorp New Zealand. This in-force portfolio was transferred to DPL at the start of fiscal year 2017, along with a capital injection to support DPL’s solvency position.
A.M. Best expects DPL’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), to remain at an adequate level and be supportive of the ratings. DPL’s underwriting performance and market profile also are expected to benefit from the acquisition of an established brand name and book of business. Autosure’s business and product offerings are largely similar to DPL’s existing business, albeit on a significantly larger scale. Hence, as fixed costs now can be shared over a larger premium base, this acquisition should significantly reduce the expense ratio due to economies of scale and generate better underwriting profitability.
Partially offsetting rating factors include higher premium leverage that arises from the acquisition, as well as additional operational and business risks associated with the integration process. Moreover, competitive pressures and changes in market conditions that emerge potentially could undermine the value of intangible assets realized upon the acquisition, including that of the Autosure-brand name and agency relationships, which currently make up a substantial portion of DPL’s balance sheet.
While upward rating actions are unlikely in the near term, negative rating movement could occur if DPL fails to maintain an adequate risk-adjusted capitalization or there is significant deterioration in its operating performance. In addition, DPL’s ratings also may experience downward pressure if there is any significant deterioration in Turners’ financial condition.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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