HONG KONG--(BUSINESS WIRE)--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 Sompo Japan Nipponkoa Insurance Inc. (SJNK) (Japan). The outlook of these Credit Ratings (ratings) is stable.
AM Best also has affirmed the FSR of A+ (Superior) and the Long-Term ICR of “aa-” of the operating subsidiaries of Sompo International Holdings Ltd. (SIH) (Pembroke, Bermuda). Concurrently, AM Best has affirmed the Long-Term ICR of “a” of SIH, an intermediate holding company for this group. Also, AM Best has affirmed the Long-Term Issue Credit Ratings (Long-Term IRs) of “a-” which are guaranteed by SIH. The outlook of all of these Credit Ratings (ratings) is stable. (See below for a detailed list of companies and Long-Term IRs.)
The ratings of SJNK reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
SJNK’s balance sheet strength is supported by its risk-adjusted capitalization, which is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s financial ratios also remain conservative, with adjusted debt leverage ratios generally under 25%, albeit slightly higher than some of its peers.
The company’s underwriting performance deteriorated in fiscal year 2018, with a combined ratio that exceeded 100% and an increased incurred loss ratio caused mainly by domestic natural catastrophes in 2018. Prospectively, in the absence of these non-recurring factors, together with initiatives to improve profitability, AM Best believes SJNK’s underwriting performance will revert to a strong level.
SJNK is the market leader in Japan’s non-life segment with over 25% of the market share and has demonstrated stable operating trends over the years. Although the company has a growing book of overseas insurance business, the execution of its global mergers & acquisition (M&A) strategy is a major risk factor when assessing its business profile. Nevertheless, AM Best believes that the company will continue to adopt a disciplined approach when considering its M&A opportunities.
The rating affirmations of SIH and its subsidiaries reflect the balance sheet assessment at the strongest level, adequate operating performance, neutral business profile and appropriate ERM. Additionally, SIH benefits from SJNK’s explicit financial support in the form of a net worth maintenance agreement and thus receives additional rating enhancement.
The stable outlooks for SJNK reflect AM Best’s view that it will continue to maintain strong business trends in its domestic non-life business and develop its overseas insurance business in a prudent manner. Negative rating actions could occur for SJNK if there is a material decline in its risk-adjusted capitalization due to a consistent deterioration in the company’s operating performance or capital erosion from large-scale catastrophe events.
The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” have been affirmed with a stable outlook for the following subsidiaries of Sompo International Holdings Ltd.:
- Endurance Specialty Insurance Limited
- 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
- Sompo America Insurance Company
- Sompo America Fire & Marine Insurance Company
- Lexon Insurance Company
- Bond Safeguard Insurance Company
The following Long-Term IRs have been affirmed with a stable outlook:
Sompo International Holdings Ltd.—
-- “a-” on $335 million 7% senior unsecured notes, due 2034 (issued by Endurance Specialty Holdings Ltd. and guaranteed by Sompo International Holdings Ltd.)
-- “a-” on $300 million 4.7% senior unsecured notes, due 2022 (issued by Montpelier Re Holdings Ltd. and guaranteed by Sompo International 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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