Mitsui Sumitomo Insurance Company’s (MSI) operating results remain strong, supported by the company’s continued trend of ever-increasing premium income in the past, notes AM Best.
Over the last five fiscal years (fiscal years 2016-2020), the company’s takeover of its local insurance business has also remained strong with an average combined ratio of 93.9%. However, the company’s overseas business continued to be negatively affected by the losing MS Amlin AG in fiscal 2021, although it has recently shown some improvements.
AM Best affirmed MSI’s A + (Excellent) Financial Strength Rating (FSR) and the issuer’s long-term credit rating of “aa” (Excellent). At the same time, the agency confirmed:
The A + FSR (Superior) and the long-term ICR of the “aa” (Superior) of the American operating companies of MSI, based in New York: Mitsui Sumitomo Insurance Company of America (MSIA), Mitsui Sumitomo Insurance USA (MSU) and MSIG Specialty Insurance USA (MSIGS)
FSR of A + (Superior) and long-term ICR of “aa” (Superior) of Aioi Nissay Dowa Insurance Company (ADI) (Japan).
FSR of A- (excellent) and long-term ICR of “a-” (excellent) of Aioi Nissay Dowa Insurance (China) Company (ADIC).
The outlook for all of the above credit ratings is “Stable”. These companies are ultimately owned by MS&AD Insurance Group Holdings (MS&AD), a major non-life insurance group based in Japan.
MSI’s ratings reflect the strength of the group’s balance sheet, which AM Best as the strongest, as well as its strong operating results, favorable business profile and proper corporate risk management (ERM).
MSI’s ratings have been extended to MSIA, MSU and MSIGS, as these companies continue to play a strategically important role for the organization as local insurers in the United States. US operations support corporate global initiatives by providing support to the group’s clients around the world. The group receives direct capital support from its mother and participates in reinsurance programs for the entire company.
The strength of MSI’s balance sheet mainly reflects its risk-adjusted capitalization at its strongest level, measured by Best’s Capital Adequacy Ratio (BCAR). This assessment is also supported by the low financial leverage of the company and the good quality of the capital. At the same time, the significant investment in the company’s shares continues to expose it to significant equity risk, although there appears to be significant capital available to bear this risk. The rating also reflects the assessment of the balance sheet strength of its strongest parent (MS&AD), which is supported by its high level of available capital, low financial leverage and high level of financial flexibility, which gives it good access to capital and debt markets.
MSI is a major non-life insurer in Japan with a solid reputation and position in its domestic market. The company continues to be the market leader and holds a significant share of approximately one-fifth of Japan’s highly consolidated domestic non-life insurance segment in terms of net premiums written. The company also has a significant overseas insurance business, contributing approximately 30% of its consolidated net premium income, and seeks to expand its operations abroad to diversify its sources of profit.
MSI’s “stable” outlook reflects AM Best’s expectations that the company will maintain its overall risk-based balance sheet assessment at its strongest level, while ongoing strategic initiatives will help maintain its strong operating results and favorable business profile during the interim period.
Aioi Nissay Dowa insurance (ADI) [Japan]
ADI’s ratings reflect its balance sheet strength, which AM Best rates as the strongest, as well as its strong operational efficiency, neutral business profile and appropriate ERM. The ratings also take into account the strategic importance of ADI for the parent company (MS&AD), as one of the two main operating units and an integral part of the group.
The assessment of ADI’s balance sheet strength reflects the company’s highest level of risk-adjusted capitalization, measured by BCAR, conservative financial leverage and good capital quality. At the same time, ADI remains exposed to equity risk, potentially from its equity investments, although it appears to have a significant amount of available capital to bear that risk.
ADI’s operating results are strong and consistent, supported by steady premium growth and a strong performance of local business takeovers with an average combined ratio of approximately 95% over the last five fiscal years (fiscal years 2016-2020). The company’s overseas business has remained profitable in recent years, although its size and contribution to profits are relatively small.
In the long run, AM Best expects that ADI’s continued growth and stable combined ratio of mid-90s in local businesses will continue to maintain a strong assessment of the company’s operating results.
ADI is one of the main insurers in Japan with a solid reputation and market position. The company’s internal business continues to benefit from its long-term business relationship with Toyota Motor Corporation and Nippon Life Insurance Company. However, its overseas insurance business is relatively small compared to other domestic insurers in Japan, which limits the company’s growth potential outside of Japan.
Stable prospects for ADI reflect AM Best’s expectations that the company will maintain its overall balance sheet assessment, supported by risk-adjusted capitalization at the strongest level as measured by BCAR, while maintaining strong and consistent operational performance in its national non-animals. insurance business during the interim period.
ADIC’s ratings reflect its balance sheet strength, which AM Best as very strong, as well as adequate operating results, a limited business profile and an appropriate ERM. The ratings also reflect the company’s strategic importance to its parent, ADI, as a key contributor to overseas profits and a key component of ADI’s business expansion in China.
ADI China (ADIC)
The risk-adjusted capitalization of ADIC is assessed as very strong, measured by BCAR, complemented by moderate insurance leverage, conservative distribution of investment assets and modest reinsurance leverage. Operating performance is also consistently profitable, with a five-year ratio of 96.5% and a five-year return on equity of 5.9% (2017-2021).
ADIC focuses on personal lines business in China, mainly car insurance, which is high frequency, low weight. For the fiscal year ended March 31, 2021, the company reported a significant contraction in pre-tax operating income in the year following the implementation of the comprehensive car insurance reform in September 2020.
In the short term, ADIC’s highest performance could be affected by a number of external challenges, such as the potential economic slowdown and slow new car sales in China. Nevertheless, in response to these challenges, the company will continue to explore more opportunities to work with its current and future business partners to restore growth in the first place, while strengthening uptake and implementing adequate controls to ensure that the combined ratio may return to a level closer to its long-term average over the medium term.