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 balance sheet strength, which A.M. Best categorizes as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The company’s balance sheet strength assessment is underpinned by adequate risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Prospectively, A.M. Best expects controlled underwriting growth and robust internal capital generation to help maintain at least an adequate level of risk-adjusted capitalization. Offsetting balance sheet factors include the significant volume of intangible assets that were created as part of the company’s acquisition of Autosure’s business in 2017, including goodwill items relating to the brand name and agency relationships.
DPL has reported operating profits consistently over the past five years. However, the driver of overall earnings historically has been investment operations, with the company’s small scale underwriting activity, prior to the Autosure acquisition, having created an expense strain that inhibited technical profitability. Commencing fiscal year 2018, A.M. Best expects the company to exhibit lower expense ratios, as its benefits from economies of scale and a greater premium base to spread fixed costs over following the acquisition. Going forward, stronger underwriting performance is expected to drive a greater balance of earnings.
A.M. Best views the company’s business profile as limited given its niche and small scale of operations. In addition, DPL’s core lines of business, including mechanical breakdown insurance for motor vehicles in New Zealand, remain subject to persisting competitive market conditions. Despite this, DPL’s ownership and affiliation with its parent, Turners Automotive Group Limited, which is the largest retailer of motor vehicles in New Zealand, provides good access to business and creates a valuable distribution network.
ERM is viewed as appropriate given the size and complexity of DPL’s operations. The company also benefits from a level of risk management oversight and governance from its parent.
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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