HONG KONG–(BUSINESS WIRE)–AM Best Affirmed Mitsui Sumitomo Insurance Company, Limited (MSI) (Japan) Financial Strength Rating (FSR) of A+ (Superior) and Issuer Long Term Credit Rating of “aa” (Superior). At the same time, AM Best has confirmed the FSR of A+ (Superior) and the long-term KPIs of “aa” (Superior) of MSI’s American operating companies, domiciled in New York, NY: Mitsui Sumitomo Insurance Company of America (MSIA ), Mitsui Sumitomo Insurance USA Inc. (MSU) and MSIG Specialty Insurance USA Inc. (MSIGS).
AM Best has also confirmed the FSR of A+ (superior) and the long-term ICR of “aa” (superior) of Aioi Nissay Dowa Insurance Company Limited (ADI) (Japan).
In addition, AM Best confirmed the FSR of A- (Excellent) and the long-term ICR of “a-” (Excellent) of Aioi Nissay Dowa Insurance (China) Company Limited (ADIC) (China).
The outlook for all of the above credit ratings (ratings) is stable. These companies are ultimately owned by MS&AD Insurance Group Holdings, Inc. (MS&AD), a major non-life insurance group based in Japan.
MSI’s ratings reflect the strength of the group’s balance sheet, which AM Best rates as the strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
MSI’s ratings have been extended to MSIA, MSU and MSIGS as these companies continue to play a strategically important role for the organization as US national insurers. Operations in the United States support the company’s global initiatives, providing support to group customers around the world. The group receives direct financial support from its parent company and participates in company-wide reinsurance programs.
MSI’s balance sheet strength primarily reflects its highest risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR). This assessment is also supported by the company’s low financial leverage and good capital quality. At the same time, the company’s large equity investment continues to expose it to considerable equity risk, although it appears to have a significant amount of capital available to absorb that risk. The rating also reflects its ultimate parent’s (MS&AD) strongest balance sheet strength assessment, which is supported by its high level of available capital, low financial leverage and high level of financial flexibility which gives it a good access to capital and debt markets. .
MSI’s operating performance remained strong; this assessment continues to be supported by the company’s consistent trend of consistently growing premium income in the past. Over the past five years (fiscal years 2016-2020), the company’s underwriting performance in its domestic insurance business has also remained strong with an average combined ratio of 93.9%. However, the company’s overseas business continued to be negatively affected by the loss-making MS Amlin AG in fiscal 2021, although it has shown some improvements lately.
MSI is a leading non-life insurer in Japan with a strong reputation and position in its home market. The company continues to be a market leader and holds a significant share of approximately one-fifth of the highly consolidated domestic non-life insurance segment in Japan, in terms of net premiums written. The company also has a significant overseas insurance business that contributes approximately 30% of its consolidated net premium income, and it is seeking to expand its overseas operations to diversify its sources of earnings.
The stable outlook for MSI reflects AM Best’s expectation that the company will maintain its overall balance sheet valuation, supported by risk-adjusted capitalization at the highest level, while ongoing strategic initiatives will help maintain its strong performance. operational and its favorable commercial profile in the medium term. .
Negative rating actions could arise for MSI in the event of a significant deterioration in risk-adjusted capitalization caused by substantial investment losses or large-scale natural disasters. Negative rating actions could also occur in the event of a material deterioration in MS&AD’s credit profile, including its risk-adjusted capitalization, leverage or interest coverage levels.
ADI’s ratings reflect the strength of its balance sheet, which AM Best rates as the strongest, as well as its strong operational performance, neutral business profile and appropriate ERM. The ratings also take into account the strategic importance of ADI to its parent company (MS&AD), as one of the two main operating entities and an integral part of the group.
ADI’s balance sheet strength rating reflects the company’s highest level of risk-adjusted capitalization as measured by BCAR, conservative financial leverage and good capital quality. At the same time, ADI remains potentially exposed to equity risk due to its equity investments, although it appears to have a significant amount of capital available to absorb this risk.
ADI’s operating performance has been strong and consistent, supported by steady premium growth and strong underwriting performance in its domestic business with an average combined ratio of approximately 95% over the past five years (fiscal years 2016-2020 ). The company’s overseas operations have remained profitable in recent years, although its size and profit contribution have been relatively small. Over the long term, AM Best expects ADI’s steady top line growth and stable combined ratio at mid-90s levels in its domestic business will continue to support the company’s strong operating performance rating. ‘company.
ADI is one of the leading insurers in Japan with a strong reputation and market position. The company’s domestic non-life business continues to benefit from its long-term business relationship with Toyota Motor Corporation and Nippon Life Insurance Company. However, its overseas insurance business is relatively small compared to other domestic insurers in Japan, which limits the company’s growth potential outside Japan.
ADI’s stable outlook reflects AM Best’s expectation that the company will maintain its overall balance sheet valuation, supported by highest level risk-adjusted capitalization, as measured by BCAR, while maintaining strong and consistent operations in its domestic non-life business. medium-term insurance business.
Negative rating actions could arise for ADI in the event of a material deterioration in its risk-adjusted capitalization caused by substantial investment losses or large-scale natural disasters. Negative rating actions could also occur in the event of a material deterioration in the credit profile of MS&AD or Mitsui Sumitomo Insurance Company, Ltd., including their risk-adjusted capitalization levels, leverage or interest coverage levels. .
ADIC’s ratings reflect the strength of its balance sheet, which AM Best rates as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM. The ratings also reflect the company’s strategic importance to its parent company, ADI, as a major contributor to overseas business profits and a key component of ADI’s business expansion in China.
ADIC’s risk-adjusted capitalization is rated very strong, as measured by BCAR, complemented by moderate underwriting leverage, conservative investment asset allocation and modest reinsurance leverage. Operating performance has also been consistently profitable, with a five-year cost to income ratio of 96.5% and a five-year return on equity of 5.9% (2017-2021).
ADIC focuses on personal business in China, primarily automobile insurance, which is high frequency and low severity in nature. For the year ended 2021, the company recorded a significant contraction in its year-over-year pre-tax operating profit, following the implementation of the comprehensive auto insurance reform in September 2020 In the short term, ADIC’s performance could be affected by a number of external challenges, such as the potential economic downturn and sluggish new car sales in China. Nonetheless, in response to these challenges, the company will continue to explore more opportunities to collaborate with current and potential business partners to restore revenue growth, while strengthening underwriting and implementing corrective measures. control activity to ensure that its combined ratio can return to a level closer to its medium-term long-term average.
A negative rating action for ADIC could occur if its underwriting or operating performance does not improve in accordance with AM Best’s expectations. A negative rating action could also occur in the event of a significant decline in its risk-adjusted capitalization or a reduced level of support from its parent company, ADI.
Ratings are communicated to rated entities before publication. Unless otherwise indicated, the ratings have not been changed as a result of this communication.
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