HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating (FSR) of A++ (Superior) and the issuer credit rating (ICR) of “aa+” of Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF) (Japan). Concurrently, A.M. Best has affirmed the FSR of A+ (Superior) and the ICR of “aa-” of TMNF’s subsidiary, Tokio Marine Pacific Insurance Limited (TMPI) (Guam). The outlook for all ratings is stable.
The ratings reflect TMNF’s solid risk-adjusted capitalization, trend of favorable operating and underwriting results and strong market profile. TMNF is a wholly owned subsidiary of Tokio Marine Holdings Inc. (Japan). TMNF is the main operating company in the group in terms of earnings contribution and the core company to implement expansion strategies into overseas markets. TMNF has completed some large-scale acquisitions in the past five years. These acquisitions have included Tokio Marine Kiln Group Limited, Philadelphia Consolidated Holding Corp. and Delphi Financial Group Inc. in developed markets and led to a material change in TMNF’s portfolio in terms of geographic exposure and risk profile. TMNF acquired these companies, which have relatively low exposure to catastrophe risks, in order to control its overall risk profile. TMNF’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), has continued to improve over the past three years, primarily owing to an increase in its capital and surplus, led by recovery in the financial market conditions and improved profitability. In addition, the company’s well-diversified book of business supports the robust level of risk-adjusted capitalization.
Profitability of TMNF’s non-life portfolio in the domestic market has further improved in fiscal year 2013, largely due to sustained rate increases in its major product line. In addition, the contribution of overseas businesses has grown substantially during the past year due to the smooth progress in integrating overseas businesses.
Partially offsetting factors include challenging market conditions and catastrophe and weather-related losses, which could lead to an increase in volatility in operating results.
TMNF is well positioned for its current rating level. Downward rating actions could occur if there is an adverse impact on TMNF’s risk-adjusted capitalization due to a material deterioration in operating performance or large-scale occurrences of catastrophe events.
The ratings of TMPI reflect its solid risk-adjusted capitalization, leading position in the accident and health (A&H) insurance market in Guam and profitable underwriting results. The ratings also acknowledge the support TMPI receives from TMNF in terms of capital guarantee, reinsurance and risk management.
TMPI's capital base has achieved significant growth over the past five years, mainly attributed to its strong underwriting profits during the period. TMPI maintains a solid risk-adjusted capitalization, as measured by BCAR, and its capitalization level is expected to remain satisfactory in the near term to support its projected business growth.
TMPI is the largest health insurance provider in Guam. The SelectCare program, the health plan TMPI offers through its agent, has a strong market presence in Guam and was the sole health insurance provider for the government of Guam employees and retirees from 2007 to 2013. Although TMPI lost its exclusive position on this government account in 2013, it still managed to retain approximately 90% of the policies on renewal.
Offsetting rating factors include TMPI’s business concentration risk, its catastrophe exposures and the competitive market landscape in Guam’s non-life market.
TMPI is heavily reliant on A&H business, since 90% of its premium is generated from this portfolio and the government of Guam employees and retirees health plan is a key contributor to the company’s top line. To make up the premium lost from the government of Guam account, TMPI continues to explore new growth drivers, such as the Federal Employees Health Benefits Program and personal motor.
Positive rating action is unlikely in the near term. Negative rating actions could occur if there is a significant deterioration in the company’s operating performance, resulting in a substantial decline in its risk-adjusted capitalization.
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.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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