Press Release - AUGUST 18, 2017
A.M. Best Affirms Credit Ratings of Tokio Marine & Nichido Fire Insurance Co., Ltd. and Its U.S. Subsidiaries
FOR IMMEDIATE RELEASE
HONG KONG - AUGUST 18, 2017
Concurrently, A.M. Best has affirmed the FSR of A++ (Superior) and the Long-Term ICR of “aa+” of Tokio Marine America Insurance Company (TMAIC) and its subsidiaries. TMAIC has separate 100% quota share agreements with its subsidiaries: Trans Pacific Insurance Company, TM Specialty Insurance Company (Phoenix, AZ) and TNUS Insurance Company. The outlook for each rating is stable. These companies are domiciled in New York, NY, unless otherwise specified. TMAIC is a wholly owned subsidiary of Tokio Marine North America Inc., which is an insurance holding company subsidiary of TMNF.
A.M. Best also has affirmed the FSR of A+ (Superior) and the Long-Term ICR of “aa-” of Tokio Marine Pacific Insurance Limited (TMPI) (Guam), which is a fully owned subsidiary of TMNF. The outlook of these ratings is stable.
The rating affirmations for TMNF reflect its strong risk-adjusted capitalization, track record of profitable operating performance and favorable business profile.
TMNF’s strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), was supported by an increase in adjusted capital and surplus. Operating performance remains very profitable, supported by strong improvement in underwriting results, which partially offset a decline in net investment income.
TMNF is the main operating entity of Tokio Marine Holdings, Inc. in terms of premium income and net profit contribution. TMNF’s extensive and increasing overseas presence, especially in developed markets, supports its profit generation and future growth. In addition, TMNF benefits from geographic and risk diversification.
Partially offsetting these positive rating factors are TMNF’s exposure to catastrophe risks and its high proportion of equity investments, which could bring volatility to its capital and surplus. However, the company actively manages these risks in its enterprise risk management framework.
While positive rating actions are unlikely in the near term, negative rating actions could occur if there is a material decline in TMNF’s risk-adjusted capitalization due to either a consistent deterioration in the company’s operating performance or a negative impact from large-scale catastrophe events.
The ratings for TMAIC and its subsidiaries reflect their strong capital position and well-defined business profile. These companies serve a critical role in TMNF’s worldwide strategy. The primary focus of these subsidiaries is to support the needs of TMNF’s clients that have operations in the United States.
The ratings of TMAIC are directly related to the ratings of TMNF; therefore, any upward or downward movement in the ratings of TMNF would affect the ratings of TMAIC. Also, any material change in the financial condition of TMNF or its commitment to the market in the United States could impact the ratings of TMAIC. Separately, the ratings may be negatively impacted if TMAIC’s capitalization or operating performance falls markedly short of expectations.
The rating affirmations for TMPI reflect its strong risk-adjusted capitalization, continued leading position in Guam’s accident and health (A&H) insurance market and consistently favorable operating performance. TMPI receives managerial support, reinsurance and risk management support from TMNF, and there is an expectation that TMPI would receive capital support from its parent under a stressed situation.
TMPI holds a solid leading position in Guam’s A&H segment through a strong distribution partnership with its underwriting agent, Calvo Insurance Underwriters, the sole distributor of Guam’s largest health care program, SelectCare. Leveraging its parent’s brand name, TMPI maintains long-term relationships with Japan clients and other property/casualty brokers across the region.
Offsetting rating factors include TMPI’s high business concentration on a single account (SelectCare program). In addition, A.M. Best expects TMPI’s underwriting profitability to be challenged by the continued competitive market conditions in Guam.
While positive rating actions are unlikely in the near term, negative rating actions could occur if there is continued and significant deterioration in the company’s operating performance or risk-adjusted capitalization, or a material decline in its A&H business volume. Negative rating actions also could occur if TMNF reduces its level of support.
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 A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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