Best’s News & Research Service - February 27, 2015 11:50 AM (EST)
A.M. Best Affirms Ratings of The Fuji Fire & Marine Insurance Company, Limited and AIU Insurance Company, Ltd
Hong Kong //BestWire// - A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit ratings of "a" of The Fuji Fire & Marine Insurance Company, Limited (Fuji Fire) (Japan) and AIU Insurance Company, Ltd. (AIU) (Japan). The two companies plan to merge in the second half of 2015 or later, pending regulatory approvals; the ultimate parent company of both companies is American International Group, Inc. (AIG) (New York, New York, USA) [NYSE: AIG]. The outlook for all ratings is stable.
Fuji Fire's risk-adjusted capitalization remained adequate to support the current ratings owing to the contribution from the improved net profit. The company has reported an improvement in its operating performance since being integrated by AIG. The integration process with AIU and comprehensive restructure in its operation, driven by the group, led Fuji Fire's underwriting results to significantly improve over the past two years.
AIU's ratings reflect its distinctive presence in the Japanese market as a significant provider of accident and health insurance (A&H). AIU's retention remained low at approximately 23% over the past five years ending in 2014, with a significant portion of risk ceded to the parent company and its affiliates.
Fuji Fire's and AIU's ratings consider the support from their parent company, AIG Japan Holdings KK, which is ultimately owned by AIG, in the areas of reinsurance arrangement, cross-selling opportunities, risk management and strategic initiatives from underwriting to claims management that are led by the group.
Negative rating actions could occur if there is a substantial deterioration in profitability or their risk-adjusted capitalization. Any favorable rating actions on AIG could put upward pressure on the companies' ratings.
The methodology used in determining these interactive ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Catastrophe Analysis in A.M. Best Ratings
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
- Evaluating Country Risk
- Understanding BCAR for Property/Casualty Insurers
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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