Rating agency AM Best says Tower Limited is expected to report positive underwriting and operating results, following a review of the New Zealand insurer’s credit assessment.

The rating agency last week affirmed the insurer’s financial strength rating at A- and long-term issuer credit rating at a-, with a stable outlook.

AM Best says the rating affirmations reflect Tower’s balance sheet strength, which it assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

Appropriate risk selection and pricing, along with anticipated expense efficiencies achieved by core system upgrades in recent years, will support the insurer’s underwriting and operating results, AM Best said.

“AM Best assesses Tower’s operating performance as adequate,” the rating agency said.

“Following the settlement of the majority of claims arising from the Canterbury earthquake events, the company’s underwriting profits have improved notably over the past three fiscal years, with the combined ratio remaining below 95% during this period.”

In the last fiscal period, Tower had reported an 8% drop in underlying net profit to $NZ20.8 million ($19.2 million) for the year to September 30.

The result reflected the challenging landscape such as claims inflation and lower investment income, the insurer said.