Best’s News & Research Service - July 20, 2018 12:27 PM (EDT)
A.M. Best Affirms Credit Ratings of Sompo Japan Nipponkoa Insurance Inc. and Most Subsidiaries
- July 20, 2018 12:27 PM (EDT)
Hong Kong //BestWire// - A.M. Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa-” of Sompo Japan Nipponkoa Insurance Inc. (SJNK) (Japan). Additionally, A.M. Best has affirmed the FSR of A+ (Superior) and the Long-Term ICR of “aa-” of Endurance Specialty Insurance Ltd. (ESIL) (Bermuda) and select subsidiaries. The outlook of these Credit Ratings (ratings) remains stable. (See below for a detailed list of these companies.)
Concurrently, Lexon Insurance Company (Austin, TX) and Bond Safeguard Insurance Company (Sioux Falls, SD), both newly acquired subsidiaries of ESIL that receive explicit financial support under a quota share reinsurance agreement, have been removed from under review with positive implications and the FSR upgraded to A+ (Superior) from B++ (Good) and the Long-Term ICRs to “aa-” from “bbb”. The outlook assigned to these ratings is stable.
A.M. Best also has assigned a Long-Term ICR of “a” to Sompo International Holdings Ltd., a newly formed intermediate holding company for this group. The outlook assigned to this rating is stable.
The ratings of SJNK reflect its balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
SJNK’s balance sheet strength is due in part to its risk-adjusted capitalization being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). In addition, while balance sheet debt has grown, the company’s financial ratios remain conservative, with adjusted debt leverage ratios generally under 25%.
While operating performance has deteriorated in the fiscal year ended March 31, 2018, A.M. Best notes that this was driven by a number of one-off factors, including natural catastrophes. Prospectively, in the absence of these one-off factors, A.M. Best expects that underwriting and operating performance will revert back to a strong level.
SJNK continues to maintain a strong competitive position, demonstrating stable business trends as a leading non-life insurer in Japan. In addition, the company has a growing book of overseas insurance business, which now accounts for more than 25% of its premium revenue. A major risk factor in its business profile assessment is the execution of its global merger & acquisition (M&A) strategy. Nevertheless, A.M. Best believes that the company will continue to adopt a disciplined approach when considering its M&A opportunities.
The stable outlooks reflect A.M. Best’s view that SJNK will continue to maintain strong business trends in its domestic non-life business, as well as developing its overseas insurance business in a prudent manner.
Negative rating actions could occur if there is material deterioration in its risk-adjusted capitalization due to a significant decline in operating performance. Potential large-scale catastrophe events or a failure to execute its M&A strategy also could cause downward ratings pressure if SJNK’s financial condition is adversely affected.
The rating affirmations of ESIL and its select subsidiaries reflect the balance sheet assessment being at the strongest level, adequate operating performance, neutral business profile and appropriate ERM. Additionally, ESIL benefits from SJNK’s explicit financial support in the form of a net worth maintenance agreement and thus receives additional rating enhancement.
The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” have been affirmed with a stable outlook for the following subsidiaries of Endurance Specialty Insurance Ltd.:
- Endurance Assurance Corporation
- Endurance Worldwide Insurance Limited
- Endurance American Specialty Insurance Company
- Endurance American Insurance Company
- Endurance Risk Solutions Assurance Co.
- American Agri-Business Insurance Company
- Sompo America Insurance Company
- Sompo America Fire & Marine Insurance Company
The following Long-Term Issue Credit Ratings have been affirmed with a stable outlook:
Sompo International Holdings Ltd.—
— “a-” on $335 million 7% senior unsecured notes, due 2034 (issued by Endurance Specialty Holdings Ltd. and guaranteed by Sompo International Holdings Ltd.)
— “a-” on $300 million 4.7% senior unsecured notes, due 2022 (issued by Montpelier Re Holdings Ltd. and guaranteed by Sompo International Holdings Ltd.)
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 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 see A.M. 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 A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source.