SINGAPORE--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of DPL Insurance Limited (DPL) (New Zealand). The outlook for each rating is stable.
DPL is a small insurance provider of life and non-life insurance products within the New Zealand market. Its ultimate parent is Turners Limited (formerly Dorchester Pacific Limited), a financial services company listed on the New Zealand Stock Exchange.
The ratings reflect DPL’s adequate risk-adjusted capitalization, favorable claims experience and high return on net assets.
DPL’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is adequate and supportive of the current rating level. In addition, claims experience has been favorable, as indicated by an average loss ratio of approximately 30% over the past five years. Furthermore, the company continues to hold a diversified book of high-yield reverse annuity mortgages, which exhibits relatively low credit and interest risks. The stable interest income generated from these reverse annuity mortgages provides a substantial buffer against claims-related volatility from the company’s insurance business.
Key offsetting rating factors are DPL’s consistently high expense ratio and the business risks associated with the company’s rapid expansion plans.
DPL’s expense ratio has remained comparatively high, stemming from a relatively modest premium base. Historically, fee income contributions from DPL’s closed book of investment-linked products have helped to offset DPL’s high expenses. However, these products are in run-off, and so there is an increasing need for DPL to grow its top line and to realize economies of scale. A.M. Best expects this to be achieved by the organic growth of its current product lines, particularly from its non-life business, as well as any potential acquisitions. Nonetheless, if profits generated by the new product lines do not emerge as expected, DPL’s overall financial condition could be adversely affected.
While upward rating actions are unlikely in the near term, negative rating movement could occur if DPL fails to maintain its overall positive operating performance or if there is a significant deterioration in its risk-adjusted capitalization. In addition, DPL’s rating may also experience downward pressure if there is any significant deterioration in the financial condition of its ultimate parent.
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 rating(s) that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page.
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