HONG KONG–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating (FSR) of A+
(Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of
“aa” of Mitsui Sumitomo Insurance Company, Limited (MSI) (Japan) and
Aioi Nissay Dowa Insurance Company Limited (ADI) (Japan).
Concurrently, AM Best has affirmed the FSR of A+ (Superior) and the
Long-Term ICRs of “aa” of MSI’s U.S. operating companies: Mitsui
Sumitomo Insurance Company of America (MSIA), Mitsui Sumitomo Insurance
USA Inc. (MSU), and MSIG Specialty Insurance USA Inc (MSIGS). These
companies are domiciled in New York, NY.
AM Best also has affirmed the FSR of A- (Excellent) and the Long-Term
ICR of “a-” of Aioi Nissay Dowa Insurance (China) Company Limited (ADIC)
(China). The outlooks for all of the aforementioned Credit Ratings
(ratings) are stable. These companies are owned ultimately by MS&AD
Insurance Group Holdings, Inc. (MS&AD), a major non-life insurance group
based in Japan.
The ratings of MSI reflect the group’s balance sheet strength, which AM
Best categorizes as strongest, as well as its strong operating
performance, favorable business profile and appropriate enterprise risk
management (ERM).
The ratings of MSI have been extended to MSIA, MSU and MSIGS, as these
companies hold a strategic role within the organization as U.S. domestic
insurers, and receive the benefit of strategic direction and explicit
support provided through internal reinsurance. The ratings also reflect
their strong risk-adjusted capitalization and additional implicit
support provided by the parent. Effective Jan. 1, 2015, MSIA, MSU and
MSIGS operate under a pooling agreement. This further strengthens the
relationship among the U.S.-based entities and vertically through the
organization.
MSI’s balance sheet strength is supported from its risk-adjusted
capitalization, which is assessed at the strongest level, as measured by
Best’s Capital Adequacy Ratio (BCAR). Although MSI maintains a
relatively high common stock leverage, the BCAR score remained at the
strongest level in equity investment stress-test scenarios. As the lead
rating unit of MS&AD group, MSI also benefits from the group’s positive
combined balance sheet strength assessment.
The company’s direct insurance portfolio has an excellent performance
track record, mainly supported by a profitable domestic non-life
business that tends to generate combined ratios less than 95%. For the
12 months ended March 31, 2019, the underwriting results from overseas
insurance business had improved, although consolidated underwriting
results had been pressured by the impact of domestic natural
catastrophes. Prospectively, in the absence of major natural
catastrophes, AM Best believes MSI’s underwriting performance will
revert to a strong level.
MSI is a major non-life insurer in Japan, and its business profile
benefits from its strong and competitive position in the domestic
market. The company maintains a market leading position, having captured
almost one-fifth of the domestic market while demonstrating stable
operating trends. Additionally, MSI has a sizeable book of overseas
insurance business, which now accounts for a material portion of its
premium revenue.
The stable outlooks reflect AM Best’s view that MSI will continue to
maintain strong business performance trends in its domestic non-life
business, as well as gradual improvement in overseas business’ operating
performance.
Negative rating actions could occur for MSI if there is a significant
deterioration in the insurer’s operating profitability trend, or in the
event of an erosion of capital resulting from significant investment
losses or large scale catastrophes.
The ratings of ADI reflect its balance sheet strength, which AM Best
categorizes as strongest, as well as its strong operating performance,
neutral business profile and appropriate ERM. ADI’s ratings also
consider the strategic importance to its parent company, MS&AD.
ADI’s balance sheet strength, which is assessed at the strongest level,
is attributed largely to favorable levels of risk-adjusted
capitalization, as measured by BCAR. Relative to some of its peers, the
company has a higher common stock leverage and higher natural
catastrophe probable maximum losses relative to its adjusted capital and
surplus. However, ADI’s BCAR score remains at the strongest level even
under various catastrophe and equity investment stress-test scenarios.
Similar to other major non-life insurers in Japan, ADI has demonstrated
favorable underwriting performance in its domestic non-life business
over the past several years, although AM Best expects its underwriting
performance for fiscal-year ended March 31 2019, had deteriorated owing
to the severe domestic natural catastrophe losses in 2018. AM Best
believes that its prospective underwriting performance will revert to a
strong level, driven by a rate hike and a lower loss ratio for the fire
line, in absence of major natural catastrophes.
ADI is one of the largest non-life insurers in Japan and places a strong
focus on domestic business. The company benefits from a long-standing
business relationship with Nippon Life Insurance Company and Toyota
Motor Corporation (Toyota), MS&AD’s major shareholders. Revenues
contributed from overseas insurance business have been limited, which
limits the company’s premium growth due to low domestic economic growth.
ADI is one of the major operating subsidiaries of MS&AD. AM Best views
many of the company’s operations, such as ERM, corporate functions and
product development, as being highly integrated into MS&AD.
The stable outlooks reflect AM Best’s view that ADI will continue to
maintain the positive growth trend in its domestic non-life business,
and expected improvement in its overseas insurance and inward
reinsurance business operating performance.
The ratings of ADIC reflect its balance sheet strength, which AM Best
categorizes as very strong, as well as its adequate operating
performance, limited business profile and appropriate ERM. The ratings
also reflect the wide range of support the company receives from its
parent, ADI.
ADIC’s risk-adjusted capitalization remains at the very strong level, as
measured by BCAR, supported by a highly conservative investment
portfolio and an appropriate reinsurance program. Since 2015, the
company has focused on writing inward motor reinsurance business, which
accounted for the majority of its underwriting portfolio over the last
few years, sourced with the help of its parent. As the motor risks are
high frequency low severity in nature, ADIC recorded stable and positive
underwriting results in each of the last three years since fiscal year
2016, which contributed to organic growth in its capital and surplus. AM
Best expects that the company’s close ties with its motor reinsurance
business source will ensure a stable and steadily growing stream of
underwriting income over the medium term. ADIC receives a high level of
support from its parent in several areas including business development,
reinsurance, management, operations, and capital support.
Partially offsetting factors include ADIC’s concentration risk in the
inward motor reinsurance business line, in particular its reliance on a
single account, which has been a major source of revenue and
underwriting profit for the company.
Negative rating actions could occur for ADI if there is a significant
deterioration in its operating profitability trend, or in the event of
an erosion of capital resulting from significant investment losses or
large scale catastrophes.
Positive rating action could occur for ADIC if it continues to
demonstrate steadily improving underwriting and operating results while
maintaining solid risk-adjusted capitalization. Negative rating action
could occur if there is significant deterioration in ADIC’s operating
performance or a material decline in its risk-adjusted capitalization.
Negative rating action also could occur if there is a reduced level of
support from the 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 Credit Ratings that have been published
on AM 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 AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media
use of Best’s Credit Ratings and AM Best press releases, please view Guide
for Media – Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
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for more information.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
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Contacts
Maggie Wu
Associate Financial Analyst
+852 2827 3421
[email protected]
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200,
ext. 5159
[email protected]
Yizhou Hong
Financial Analyst
+852 2827 3426
[email protected]
Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
[email protected]
Edin Imsirovic
Senior Financial Analyst
+1 908 439 2200, ext.
5740
[email protected]
