Best’s News & Research Service - September 09, 2022 10:47 AM (EDT)
AM Best Affirms Credit Ratings of Tokio Marine & Nichido Fire Insurance Co., Ltd. and Its U.S. Subsidiaries
- September 09, 2022 10:47 AM (EDT)
Hong Kong //BestWire// - AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa+” (Superior) 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 U.S. subsidiaries.)
The ratings reflect TMNF’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, very favourable business profile and very strong enterprise risk management (ERM).
TMNF’s balance sheet strength assessment reflects its risk-adjusted capitalisation that is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Besides its sizable solvency capital of JPY 5 trillion (USD 41 billion), this assessment also is supported by the company’s low financial leverage.
TMNF has a track record of strong operating performance, mainly supported by strong premium growth and a five-year average return on equity of 8.4% (fiscal year 2017 – 2021), as calculated based on comprehensive income. In its domestic market, TMNF continues to have a consistently strong and sizable non-life insurance business with an average five-year combined ratio of approximately 95.6% (fiscal years 2017-2021), excluding its compulsory automobile liability insurance business. TMNF’s international businesses also recorded strong net premium written (NPW) growth across different markets while its bottom line recorded significant improvement due to better profitability and strong investment incomes in fiscal 2021.
TMNF continues to maintain a diversified business profile with operations spanning across different markets and lines of business. In Japan, it maintains a leading position with a market share of over 25% in terms of NPW. It continued to top its domestic peers in all major lines of business in terms of NPW volume in fiscal year 2021. Over the past decade, TMNF has successfully built a high-quality book of overseas insurance business with its disciplined merger and acquisition strategy, which now accounts for approximately 35% of its NPW. AM Best believes that TMNF’s leading position in its domestic market and sizable international business profile will continue to help it navigate challenging market condition while enhancing earnings over the medium to long term.
The company continues to have a sophisticated ERM framework that is embedded throughout its organisation. AM Best believes that TMNF’s ERM programme is very effective in managing its group-wide exposure to potential earnings and capital volatility.
The stable outlooks reflect AM Best’s expectation that TMNF will maintain its overall balance sheet assessment, supported by risk-adjusted capitalisation at the strongest level, as measured by BCAR, while maintaining its strong performance in its domestic non-life business and developing its overseas insurance business in a prudent manner over the intermediate term.
Negative rating actions could occur if there is material deterioration in risk-adjusted capitalisation such as substantial investment losses caused by investment volatility or large-scale natural catastrophes. Negative rating actions also could occur if there is significant deterioration in Tokio Marine Holdings, Inc.’s credit profile, including its risk-adjusted capitalisation, financial leverage or interest coverage levels.
The FSR of A++ (Superior) and the Long-Term ICRs of “aa+” (Superior), 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 Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.