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-” (Superior) of Sompo Japan Insurance Inc. (SJ) (Japan) and its subsidiaries. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed list of companies below).
Concurrently, AM Best has affirmed the Long-Term ICR of “a-” (Excellent) of Sompo International Holdings Ltd. (SIH) (Pembroke, Bermuda). In addition, AM Best has affirmed the Long-Term Issue Credit Rating (Long-Term IR) of “a-” (Excellent) on $335 million 7% senior unsecured notes due by 2034 (which is guaranteed by SIH). The outlooks of these ratings are stable.
The ratings of SJ reflect its balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management (ERM).
SJ’s balance sheet strength assessment reflects the company’s strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s financial leverage remains conservative with adjusted debt leverage ratios below 25%, although it is higher compared to its domestic non-life peers in Japan.
SJ has a track record of strong operating performance, mainly supported by its consistent trend of growing premium income and a five-year average return-on-equity ratio of 7.3% (fiscal year 2018 – 2022) on a consolidated basis, as calculated by AM Best. Despite an increase in SJ’s combined ratio for its domestic business in fiscal year 2022 mainly due to natural catastrophe events, AM Best expects the prospective underwriting performance of domestic business to be impacted positively by various underwriting initiatives, including shortening the policy duration and rate increases in its fire line. SJ’s overseas business, managed by Sompo International Holdings Ltd., the intermediate holding company under SJ, continued to exhibit strong momentum in both net premium written (NPW) and adjusted profit in fiscal year 2022, driven by positive premium trends and robust investment income. AM Best expects that the overseas business will continue to support SJ’s consolidated results over the coming years, driven by improved rate environment in overseas markets and coupled with the strong U.S. dollar against the Japanese Yen that is expected to persist in the medium term.
SJ is the core operating unit of SOMPO Holdings, Inc., (SOMPO Holdings), its ultimate parent and one of the largest non-life insurance groups in Japan. The company maintains a leading market position with approximately a one-quarter share of Japan’s highly consolidated non-life insurance segment, in terms of NPW. In addition, the company has a growing book of overseas insurance business, which accounted for 38% of its NPW and 74% of its adjusted profits in fiscal year 2022.
The stable outlooks reflect AM Best’s expectation that SJ will maintain its overall balance sheet strength assessment, supported by risk-adjusted capitalisation at the strongest level, as measured by BCAR, while ongoing strategic initiatives will help maintain its strong and consistent operating performance over the intermediate term.
Negative rating actions could occur if there is material deterioration in risk-adjusted capitalisation caused by substantial investment losses or a large-scale natural catastrophe. 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 could also occur if there is significant deterioration in SOMPO Holdings’ credit profile, including its risk-adjusted capitalisation, financial leverage or interest coverage levels. Positive rating actions could occur if the company demonstrates sustained improvement in its balance sheet strength metrics, including its risk-adjusted capitalisation, financial leverage and lower reliance on reinsurance.
The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) have been affirmed with a stable outlook for the following subsidiaries of Sompo Japan Insurance Inc.:
- Endurance Assurance Corporation
- Endurance Specialty Insurance Limited
- 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
- SI Insurance (Europe), SA
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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