HONG KONG--(BUSINESS WIRE)--A.M. Best Asia-Pacific Limited has upgraded the financial strength rating to A (Excellent) from A- (Excellent) and issuer credit rating to “a” from “a-” of The Fuji Fire & Marine Insurance Company, Limited (Fuji Fire) (Japan). The outlook for all ratings is stable.
The ratings reflect Fuji Fire's supportive risk-adjusted capitalization, management’s effort to reduce overall expenditures and its conservative investment portfolio. The ratings also consider the support from its parent company, American International Group, Inc. (AIG), in the areas of cross-selling opportunities, risk management and strategic initiatives for the business integration.
The cost structure of Fuji Fire has consistently improved over the past five years, owing to the progress of management’s initiatives. The expense ratio declined to 33.6% in fiscal year 2011, compared to 37.0% five years ago. Fuji Fire is expected to further improve its operating performances as the company accelerates its integration with AIG group companies by promoting cross-selling and sharing infrastructure.
Partially offsetting these positive rating factors are deterioration in Fuji Fire’s capital and surplus in past years and its volatile profitability.
Fuji Fire’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), has weakened in fiscal year 2011 primarily due to the deterioration in profitability. The weak investment income and one-off tax adjustment caused by the changed corporate tax rate led to the net loss in fiscal year 2011.
Downward rating pressure could occur if there is an adverse impact on Fuji Fire’s risk-adjusted capitalization led by deterioration in its operating performance.
The methodology used in determining these 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. Key criteria utilized include: “Understanding Universal BCAR”; “Rating Members of Insurance Groups”; “Risk Management and the Rating Process for Insurance Companies”; “Evaluating Country Risk”; and “Catastrophe Analysis in A.M. Best Ratings.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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