AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of "aa+" of Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF) (Japan). 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 categorises 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 is underpinned by its risk-adjusted capitalisation that AM Best expects to remain at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Despite a decline in available capital following the acquisition of the members of PURE Group of Insurance Companies and a decline in the valuation of its equities, these negative impacts were offset fully by various initiatives to improve capital adequacy, such as an issuance of subordinated debt, a continued divestment of strategic equity holdings, and a reduced dividend payout.
TMNF has a track record of strong operating performance, mainly supported by its large domestic business that has an average five-year combined ratio of approximately 93% (fiscal-years 2015 -2019), as well as an expanding oversea portfolio. TMNF’s underwriting performance has deteriorated somewhat in recent years, mainly due to an increase in incurred losses as a result of the higher frequency of severe natural catastrophes. However, the company has enhanced its reinsurance programme in fiscal-year 2020 (FY2020) to protect itself against natural catastrophe exposure. AM Best expects that the revised structure will help to stabilise the company’s prospective underwriting performance.
TMNF holds a very strong and competitive position as a market leader, with a share of over 25% in its domestic market, in terms of FY2019 net premiums written. The company also has built a high-quality book of overseas insurance business successfully in recent years, which accounted for almost 40% of its consolidated premium revenue in FY2019. AM Best believes that TMNF’s product and geographical diversification will help it navigate challenging market conditions, while enhancing earnings stability over the medium to long term.
The company has 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.
Negative rating actions could occur if there is a material decline in TMNF’s risk-adjusted capitalisation due to a significant investment impairment or an erosion of capital from a higher frequency of large-scale catastrophe events.
The FSR of A++ (Superior) and the Long-Term ICRs of "aa+", 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.
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