A.M. Best has affirmed the “B+” (Good) Financial Strength Rating and the “bbb-” Long-Term Issuer Credit Rating of Auckland-based DPL Insurance Limited, the outlook for the firm is stable.
In a statement, the global ratings agency stated that DPL's ratings were a reflection of its “adequate risk-adjusted capitalization and positive operating results, underpinned by strong investment earnings.”
At the start of fiscal year 2017, DPL received the in-force portfolio of the Autosure insurance business, which was acquired by its ultimate parent Turners Automotive Group Limited in FY16, along with a capital injection to support its solvency position.
A.M. Best expects that DPL's risk-adjusted capitalization to remain at an adequate level and support the company's ratings. It also expects DPL's underwriting performance and market profile to benefit from the acquisition of Autosure, as it should significantly reduce the expense ratio due to economies of scale and generate better underwriting profitability.
Factors that partially offset the ratings include higher premium leverage due to the acquisition and additional operational and business risks associated with the integration process. Competitive pressures and changes in the market could also undermine the value of intangible assets realised upon the acquisition, including the Autosure brand name and agency relationships.
The ratings agency said upward rating actions are unlikely in the near term. DPL's ratings may experience a downward pressure, however, if the company fails to maintain an adequate risk-adjusted capitalisation, or if there is significant deterioration in its operating performance or that of Turners' financial condition.
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