JULY 30, 2015 12:55 PM (EDT)

A.M. Best Affirms Ratings of Sompo Japan Nipponkoa Insurance Inc. and Certain U.S. Subsidiaries

 James Chan
Financial Analyst

Robert Raber
Senior Financial Analyst
+(1) 908 439 2200, ext. 5696

Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644


HONG KONG - JULY 30, 2015 12:55 PM (EDT)
A.M. Best has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit rating (ICR) of "aa-" of Sompo Japan Nipponkoa Insurance Inc. (Sompo Japan Nipponkoa) (Japan). Concurrently, A.M. Best has affirmed the FSR of A+ (Superior) and the ICRs of "aa-" of Sompo Japan Insurance Company of America (SJA) and its reinsured affiliate, Sompo Japan Fire and Marine Insurance Company of America (SJFM), collectively known as Sompo Japan US Group (both domiciled in New York, NY). The outlook for all ratings remains stable.

The ratings of Sompo Japan Nipponkoa reflect its robust risk-adjusted capitalization, improvement in operating efficiency and well-established market profile. Sompo Japan Nipponkoa was formed in September 2014 by the merger between the two core non-life subsidiaries of Sompo Japan Nipponkoa Holdings, Inc. (previously known as NKSJ Holdings, Inc.), namely Sompo Japan Insurance Inc. and Nipponkoa Insurance Co., Ltd. Sompo Japan Nipponkoa continues to enhance its business profile in overseas markets and further diversify its operations. Recent major overseas investments include the full acquisition of Canopius Group Limited (Canopius) of the United Kingdom.

Sompo Japan Nipponkoa's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), remained strong at the end of March 2015, mainly driven by the large increase in unrealized gains on securities, which supported the growth in capital and surplus. Moreover, the company reported improvement in its expense ratio in fiscal year 2014, attributed to the declining net company expenses, as the company endeavored to realize more synergies from the merger of the two non-life operations.

Partially offsetting rating factors include the high exposure to stock investments and large exposure to catastrophe risks. Sompo Japan Nipponkoa's exposure to stock investments remains relatively high despite continued efforts to reduce exposure to strategic-holding stocks. Over the past five years, the company also reduced its investment allocation to bonds and increased the proportion of foreign investments in order to enhance investment return.

Sompo Japan Nipponkoa is exposed to catastrophe risks such as earthquakes, typhoons and tsunamis in the domestic market, as well as overseas natural perils. Although the reinsurance coverage is considered adequate, large-scale natural disasters could have a negative impact on the company's risk-adjusted capitalization.

Sompo Japan Nipponkoa is well-positioned at the current rating levels. Downward rating pressure could arise if the company's risk-adjusted capitalization experiences a material deterioration due to substantial adverse development in its underwriting result or investment performance.

The ratings of SJA and SJFM are based on their role and strategic importance to Sompo Japan Nipponkoa, along with explicit support provided by Sompo Japan Nipponkoa in the form of quota share reinsurance. The ratings also reflect the implied support to be provided by Sompo Japan Nipponkoa in the future in order to support the group's operations in the United States.

Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best's Ratings & Criteria Center.

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