SINGAPORE–(BUSINESS WIRE)–#insurance—AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of �bbb (Good) of DPL Insurance Limited (DPL) (New Zealand). The outlook of the Credit Ratings (ratings) is stable.
The ratings reflect DPLs balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also factor in a neutral impact from the companys ultimate ownership by Turners Automotive Group Limited (Turners), a motor vehicle retailer and financial services group in New Zealand.
DPLs balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, as measured by Bests Capital Adequacy Ratio (BCAR), which remained at the strongest level in fiscal year 2021. This reflects the companys controlled growth, robust underwriting performance and appropriate retention of overall earnings. A partially offsetting balance sheet factor remains the significant volume of intangible assets arising from the companys acquisition of Autosures insurance business in 2017, including goodwill items relating to the brand name and acquired agency relationships.
DPLs operating performance is viewed as adequate. The company reported a five-year average return-on-equity ratio of 10.4% (fiscal years 2017-2021). Technical performance has exhibited an improving trend over the past four years, with the combined ratio moving to 83.9% in fiscal year 2021 from 102.7% in fiscal year 2018, primarily driven by DPLs initiatives to enhance pricing and risk selection for its core insurance products. In addition, given the lower usage of motor vehicles due to the COVID-19 pandemic, the company saw reduced claims costs in its mechanical breakdown insurance (MBI) and guaranteed asset protection lines of business in fiscal year 2021. Investment returns remain a key driver of DPLs operating performance, with an average net investment yield (excluding gains and losses) of 3.2 % over the last five fiscal years.
AM Best views the companys business profile as limited given its niche and relatively modest scale of operations. DPLs ownership and affiliation with its parent, Turners, which is the largest retailer of used motor vehicles in New Zealand, provides good access to business and creates a valuable distribution network. However, DPLs core lines of business, including MBI for motor vehicles in New Zealand, remain subject to competitive market conditions. In addition, DPLs premium growth in 2020 and 2021 has been impacted by the fluctuations in used car sales due to disruption caused by the COVID-19 pandemic.
AM Best considers DPLs approach to risk management to be appropriate given the size and complexity of its current operations. DPL also is viewed to benefit from a level of risk management oversight and governance from the Turners group.
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 Bests 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 Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Bests Credit Ratings. For information on the proper use of Bests Credit Ratings, Bests Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Bests Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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Contacts
Yi Ding
Financial Analyst
+65 6303 5021
yi.ding@ambest.com
Yuan Tian
Senior Financial Analyst
+65 6303 5016
yuan.tian@ambest.com
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Jim Peavy
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