NOVEMBER 20, 2019 09:27 AM (EST)
AM Best Comments on Credit Ratings of Mitsui Sumitomo Ins. Co., Ltd. and Its US Subs., MS Amlin AG and Lloyd’s Syndicate 2001
FOR IMMEDIATE RELEASE
HONG KONG - NOVEMBER 20, 2019 09:27 AM (EST)
Concurrently, AM Best has commented that the FSRs of A+ (Superior) and the Long-Term ICRs of “aa” of MSI’s U.S. operating companies: Mitsui Sumitomo Insurance Company of America, Mitsui Sumitomo Insurance USA Inc. and MSIG Specialty Insurance USA Inc remain unchanged. These companies are domiciled in New York, NY. The outlook of these ratings remains stable.
This comment follows the announcement that MS&AD plans to reorganize the international businesses of its subsidiary MSI, subject to the approval of the relevant authorities and other requirements. Under this reorganization, some of MSI’s overseas subsidiaries, such as MS Amlin plc and its subsidiaries, are expected to be treated as independent asset groups. Since the profitability of some of their businesses has fallen short of the original business plan made at the time of MSI’s acquisition, an impairment loss of JPY 175.4 billion (approximately USD 1.6 billion) was recognized for the second half of fiscal-year 2019, under extraordinary losses for assets such as goodwill and other intangible assets.
AM Best does not expect a material deterioration in MSI’s consolidated risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Although this was a significant increase in extraordinary losses, which in turn has placed some pressure on profit before tax, there also will be an approximate JPY 170 billion decrease in the company’s income tax expense due to the reorganization during the second half of fiscal-year 2019. AM Best will monitor the progression of the reorganization and the ongoing profitability of MSI’s international businesses closely, as well as the implications of this event on MSI’s rating fundamentals.
Furthermore, AM Best has commented that the FSRs of A (Excellent) and the Long-Term ICRs of “a+” of MS Amlin AG (Switzerland), and Lloyd’s Syndicate 2001 (Syndicate 2001) (United Kingdom), which is managed by MS Amlin Underwriting Limited, are unchanged following the recent announcement by MS&AD, which details changes to the reporting lines of both entities. The outlook of these ratings remains stable. Syndicate 2001’s ratings reflect the financial strength of the Lloyd’s market; the Lloyd’s market rating is the floor for all syndicate ratings, reflecting the Lloyd’s chain of security, and, in particular, the role of the Central Fund, which partially mutualizes capital at the market level. AM Best expects the underwriting portfolio and business plans of MS Amlin AG to remain materially the same.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.