AM Best Affirms Credit Ratings of MS&AD Insurance Group Holdings, Inc.’s Main Operating and U.S. Subsidiaries
HONG KONG--(BUSINESS WIRE)--May 23, 2019--
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 .
AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.
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KEYWORD: EUROPE ASIA PACIFIC HONG KONG JAPAN
INDUSTRY KEYWORD: PROFESSIONAL SERVICES INSURANCE
SOURCE: AM Best
Copyright Business Wire 2019.
PUB: 05/23/2019 02:54 PM/DISC: 05/23/2019 02:54 PM