Tuesday, August 20, 2019

AM BEST AFFIRMS CREDIT RATINGS OF TOKIO MARINE & NICHIDO FIRE INSURANCE CO., LTD. AND ITS US SUBSIDIARIES

HONG KONG, Aug 19 (Bernama-BUSINESS WIRE) -- AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa+” of Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF) (Japan) and its U.S. subsidiaries. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the companies.)

AM Best also has affirmed the FSR of A+ (Superior) and the Long-Term ICR of “aa-” of Tokio Marine Pacific Insurance Limited (TMPI) (Guam), a wholly owned subsidiary of TMNF. The outlook of these ratings is stable.

The ratings of TMNF reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, very favorable business profile and very strong enterprise risk management (ERM).

TMNF’s balance sheet strength is supported by its risk-adjusted capitalization, which is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). This is supported by a large adjusted capital base, which consists of reported capital, catastrophe loss reserves and price fluctuation reserves. While the high concentration in equity investments is the major strain on its BCAR score, the company has maintained a significant amount of adjusted capital relative to the equity price risk associated with such securities.

TMNF generated positive operating profit in fiscal year 2018, even though its underwriting performance deteriorated with a high combined ratio over 100% and an increased incurred loss ratio caused mainly by natural catastrophes. Underwriting results from overseas insurance business improved, however, which largely offset the negative impact to overall performance due to domestic natural catastrophes. Prospectively, AM Best believes TMNF’s underwriting performance will revert to a strong level.

TMNF’s business profile is diversified with operations spanning across different markets and lines of businesses. It is not only a domestic non-life market leader, capturing more than one-fourth of market share, but also has built a high-quality book of overseas insurance business successfully, with disciplined merger and acquisition strategies. AM Best believes that TMNF’s product and geographical diversification will help it navigate challenging market conditions while enhancing earnings stability over the medium to long term.

AM Best believes TMNF’s ERM program is very effective in managing its group-wide exposure to potential earnings and capital volatility, in which a sophisticated risk management framework is in place and embedded throughout the organization.

The stable outlooks reflect AM Best’s view that TMNF will continue to maintain strong business trends in its domestic non-life business and develop its overseas insurance business in a prudent manner. Negative rating actions could occur if there is a material decline in TMNF’s risk-adjusted capitalization due to a consistent deterioration in the company’s operating performance or a capital erosion from large-scale catastrophe events.

The ratings of TMPI reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate ERM. The ratings also reflect the wide range of support that TMPI receives from its parent, TMNF, as well as its affiliates, in areas including brand recognition, reinsurance cession, capital, risk management and operations.

TMPI’s risk-adjusted capitalization remains at the strongest level in 2018, as measured by BCAR, supported by high-quality assets, minimal reinsurance leverage and a conservative investment portfolio. Consistent retention of profits has grown the company’s capital and surplus steadily and organically over the past 10 years. In spite of two large-scale property/casualty losses in 2018, TMPI managed to record a positive, albeit small level of underwriting profit during that year. The company maintains a low operating expense structure and has a low product risk profile, as the majority of its revenue comes from its short-tailed group accident and health (A&H) line of business with high-frequency, low-severity claims. TMPI holds a solid leading position in Guam’s A&H market through a strong distribution partnership with its exclusive managing general agent, Calvo’s Insurance Underwriters.

Offsetting rating factors include TMPI’s concentration risk in the A&H business line. Despite the company’s sustainable competitive position in Guam’s A&H market and its active expansion in other accounts in recent years, there is business concentration in the Guam government’s health plan account, which has been a major source of revenue and is subject to renewal on an annual basis. TMPI also has a geographic concentration in Guam, where soft pricing conditions continue to pose challenges to underwriting profitability. The company is exposed to regulatory risk, as the non-renewal of its tax-exempt status, as well as uncertainties in various regulatory and industry fee requirements, add pressure to its profitability.

While positive rating actions for TMPI are unlikely over the near term, negative rating actions could occur if there is a significant deterioration in the company’s operating performance, a material decline in its risk-adjusted capitalization or a significant decrease in its A&H market share in Guam. Negative rating actions also could occur if there is a reduced level of support from TMNF.

The FSR of A++ (Superior) and the Long-Term ICRs of “aa+”, each with a stable outlook, have been affirmed for the following subsidiaries of Tokio Marine & Nichido Fire Insurance Co., Ltd.:
  • Tokio Marine America Insurance Company
  • Trans Pacific Insurance Company
  • TM Specialty Insurance Company
  • TNUS Insurance Company
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.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190816005304/en/

Contact
Maggie Wu 
Associate Financial Analyst 
+852 2827 3421 
maggie.wu@ambest.com 

Yizhou Hong 
Financial Analyst 
+852 2827 3426 
yizhou.hong@ambest.com 

Samiksha Gupta 
Financial Analyst 
+1 908 438 2200, ext. 5658 
samiksha.gupta@ambest.com 

Christopher Sharkey 
Manager, Public Relations 
+1 908 439 2200, ext. 5159 
christopher.sharkey@ambest.com 

Jim Peavy 
Director, Public Relations 
+1 908 439 2200, ext. 5644 
james.peavy@ambest.com

Source : AM Best

--BERNAMA

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