AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa+” (Superior) of Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF) (Japan) and its U.S. subsidiaries. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the U.S. subsidiaries.)
The ratings reflect TMNF’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, very favourable business profile and very strong enterprise risk management (ERM).
TMNF’s balance sheet strength assessment reflects its risk-adjusted capitalisation that is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company has a robust absolute capital base and very conservative financial leverage.
TMNF has a track record of consistent premium growth and a robust bottom line, supported by its diversified business portfolios and a five-year average return on equity of 5.4% (fiscal year 2018 – 2022) on a consolidated basis, as calculated by AM Best. Although net profit is subjected to volatility from natural catastrophe losses in Japan, TMNF’s domestic non-life business has maintained a consistently profitable underwriting performance over the same period. Its domestic fire line also is expected to benefit from on-going rate hike initiatives in the years ahead. Excluding one-off COVID-19-related claim losses in Taiwan, TMNF’s international businesses continued to show notable improvement in fiscal year 2022. Its North American operations sustained strong momentum with double-digit growth in premiums and profits in local currency terms, driven by improved pricing environment and underwriting expansion. AM Best also anticipates that TMNF’s consolidated investment profits will continue to be supported by strong investment capabilities and favourable interest rate environment of its U.S. operations in the future.
TMNF continues to maintain a diversified business profile with operations spanning across different markets and lines of business on a global scale. In Japan, it maintains a strong leadership in all business lines of non-life segment with a market share of over 25% in terms of net premium written (NPW). Over the past decade, TMNF has expanded its presence overseas successfully, strategically pursuing disciplined merger and acquisition strategies to establish a portfolio of high-quality overseas insurance business, which now accounts for approximately 44% of its NPW. AM Best believes that TMNF’s leading position in the domestic market and sizeable international business profile will continue to help it navigate challenging market conditions while enhancing earnings over the medium to long term.
The company continues to have a sophisticated ERM framework that is embedded throughout its organisation. AM Best believes that TMNF’s ERM programme is very effective in managing its group-wide exposure to potential earnings and capital volatility.
Negative rating actions could occur if there is material deterioration in risk-adjusted capitalisation such as substantial investment losses caused by investment volatility or large-scale natural catastrophes or if there is persistent and significant deterioration in operating performance. Negative rating actions also could occur if there is significant deterioration in Tokio Marine Holdings, Inc.’s credit profile, including its risk-adjusted capitalisation, financial leverage or interest coverage levels.
Positive rating actions could occur if the company demonstrates exceptionally strong and consistent operating performance metrics although the likelihood of such actions remains limited at the time.
The FSR of A++ (Superior) and the Long-Term ICRs of “aa+” (Superior), each with a stable outlook, have been affirmed for the following subsidiaries of Tokio Marine & Nichido Fire Insurance Co., Ltd.:
- Tokio Marine America Insurance Company
- Trans Pacific Insurance Company
- TM Specialty Insurance Company
- TNUS Insurance Company
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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