HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “aa+” (Superior) of Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF) (Japan) and its 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). This assessment is further supported by the company’s highly conservative financial leverage and high-quality capital. Despite potential exposure to considerable equity risk from its substantial domestic stock investments, TMNF maintains a robust capital base capable of absorbing such risks. AM Best also expects that the company’s plan to accelerate disposal of strategic equity holdings could potentially reduce its overall equity risk exposure in the coming years.
TMNF has a commendable track record of consistent premium growth, supported by its diversified business portfolios, with its net premium written (NPW) rising from JPY 3.4 trillion to JPY 4.6 trillion over the last five years (fiscal year 2019 – 2023). The company has also delivered a solid five-year average return on equity of 7.4% (fiscal 2019 – 2023) on a consolidated basis, as calculated by AM Best. Despite some volatility in net profit stemming from natural catastrophe events in Japan, TMNF has maintained a consistently profitable underwriting performance in its domestic non-life business over the same period. Looking ahead, its domestic non-life business is expected to benefit from ongoing rate hike initiatives in key business lines. TMNF’s international business continued to demonstrate notable improvements across various regions in fiscal-year 2023. Its North American operations sustained strong momentum with double-digit profit growth in local currency terms, driven by proactive underwriting initiatives and favourable premium rate developments, coupled with strong investment results.
TMNF continues to maintain a diversified business profile with global operations spanning across different markets and lines of business. In Japan, it holds a strong market position across all non-life segments, commanding a market share of over 25% in terms of NPW. Over the last decade, TMNF has strategically expanded its global footprint through disciplined merger and acquisition strategies to establish a portfolio of high-quality overseas insurance business, which now represents approximately 47% of its NPW. AM Best believes that TMNF’s leading position in the domestic market and sizeable international business portfolio will continue to provide a strategic advantage, enabling it to navigate challenging market positions and enhance earnings over the medium to long term.
The company maintains a sophisticated ERM framework that is embedded throughout its organisation. AM Best believes that TMNF’s risk management capabilities align closely with the company’s highly complex and diverse risk exposures.
Negative rating actions could occur if there is material deterioration in risk-adjusted capitalisation such as substantial investment losses caused by capital market volatility or large-scale natural catastrophes. Negative rating actions could occur if there is persistent and significant deterioration in operating performance stemming from weak underwriting and investment results. 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 present.
The FSR of A++ (Superior) and the Long-Term ICRs of “aa+” (Superior), have been affirmed with stable outlooks 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.
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