HONG KONG--(BUSINESS WIRE)--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). A.M. Best also has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of SJNK’s subsidiary, NIPPONKOA Insurance Company (China) Limited (NKC) (China). The outlook of these Credit Ratings (ratings) remains stable.
Concurrently, A.M. Best has affirmed the FSR of A+ (Superior) and the Long-Term ICRs of “aa-” of Sompo America Insurance Company (SAIC) and its reinsured affiliate, Sompo America Fire & Marine Insurance Company (SAFM), collectively known as Sompo Japan US Group (both domiciled in New York, NY). The outlook for each of these ratings remains stable. Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of Canopius US Insurance, Inc. (Canopius US) (Wilmington DE). The outlook of each of these ratings remains negative.
Furthermore, A.M. Best has affirmed the FSR of A+ (Superior) and the Long-Term ICRs of “aa-” of Endurance Specialty Insurance Ltd. (Endurance) (Bermuda) and its subsidiaries. A.M. Best also has affirmed the Long-Term ICR of “a-” and the Long-Term Issue Credit Ratings (Long-Term IRs) of Endurance Specialty Holdings Ltd. (Bermuda). The outlook of these ratings is stable. (See below for a detailed list of the companies and the Long-Term IRs.)
SJNK’s ratings reflect the company’s robust level of risk-adjusted capitalization, stabilized operating performance and favorable business profile. SJNK’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains strong despite the negative impact of the goodwill from its $6.3 billion acquisition of Endurance Insurance, Ltd. The company also maintains an adequate level of financial leverage. SJNK has stabilized its operating performance over the past three years owing to the improved underwriting results in its domestic non-life businesses, tighter control over catastrophe risks and a continuous reduction in equity investments. In addition, the growing contribution from the overseas businesses supports further stabilization.
Partially offsetting rating factors are the potential volatility in capitalization driven by changing financial market conditions and the company’s moderate exposure to catastrophe risks.
Positive rating actions could occur if SJNK further stabilizes its performance by diversifying its risk profile and earnings sources. 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 successfully integrate its recent acquisition also could cause downward ratings pressure if capital levels are affected significantly.
NKC’s ratings reflect its strong risk-adjusted capitalization and the wide range of support from its parent company. NKC’s risk-adjusted capitalization remains strong due to its low underwriting leverage and conservative investment portfolio. NKC is scheduled to merge with Sompo Japan Nipponkoa Insurance (China) Co., Ltd. (SJC), pending regulatory approval.
A partially offsetting rating factor is NKC’s volatile operating performance. Although the company reported positive returns over the past two years, performance remains susceptible to large-scale losses, given that NKC mainly focuses on writing commercial risks for Japanese corporate clients.
While positive rating actions are unlikely, negative rating actions could occur if there is a material decrease in NKC’s risk-adjusted capitalization due to considerable deterioration in operating performance. Negative rating actions also could occur in the event of a large-scale catastrophe event that significantly impacts capitalization.
The ratings of SAIC and SAFM are based on their role and strategic importance to SJNK, along with explicit support provided by SJNK in the form of quota share reinsurance. The ratings also reflect the implied support to be provided by SJNK in the future for the group’s U.S. operations.
The continued negative outlook of Canopius US is primarily due to the execution risk as the company takes strategic initiatives to address financial performance. Significant actions have been implemented to address the underlying operating performance. Nonetheless, a sufficient period of time must elapse to determine sustainability of an improving trend. These rating factors are offset by Canopius US’ supportive risk-adjusted capitalization, the recognition of its importance within the Sompo Canopius Group and ultimately as part of the Sompo Japan US Group.
The affirmation of Endurance Specialty Insurance Ltd. reflects its strong level of risk-adjusted capitalization, solid operating performance, experienced management team and its strong enterprise risk management program, as well as further geographic diversification following its acquisition by SJNK earlier this year. Additionally, Endurance benefits from explicit financial support from SJNK in the form of a net worth maintenance agreement.
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
The following Long-Term IR has been assigned with a stable outlook for Endurance Specialty Holdings Ltd.:
-- “bbb” on $230 million 6.35% Series C non-cumulative preferred shares
The following Long-Term IRs have been affirmed with a stable outlook for Endurance Specialty Holdings Ltd.:
-- “a-” on $335 million 7% senior unsecured notes, due 2034
-- “a-” on $300 million 4.7% senior unsecured notes, due 2022 (unconditionally assumed from Montpelier Re Holdings Ltd.)
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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