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) for Mitsui Sumitomo Insurance Company (MSI).
The same ratings were affirmed for MSI’s U.S. operating companies, which are domiciled in New York: Mitsui Sumitomo Insurance Company of America, Mitsui Sumitomo Insurance USA Inc., and MSIG Specialty Insurance USA Inc.
In addition, AM Best affirmed the FSR of A+ (Superior) and the Long-Term ICR of “aa” (Superior) for Aioi Nissay Dowa Insurance Company (ADI) (Japan).
The FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) were also affirmed for Aioi Nissay Dowa Insurance (China) Company (ADIC).
The outlook for all these ratings is stable. These companies are owned by MS&AD Insurance Group Holdings, Inc. (MS&AD), a major non-life insurance group based in Japan.
Mitsui Sumitomo Insurance
MSI holds about one-fifth of Japan’s non-life insurance market based on net premiums written (NPW) and has a stable market position. Its overseas insurance business contributes about 30% of its consolidated net premium income, offering profit diversification.
MSI’s operating performance remains strong, supported by a steady growth in premium income and a five-year average adjusted return-on-equity ratio of 5.4% (fiscal years 2018-2022), AM Best said.
In fiscal year 2023, MSI’s overseas business showed improvements, particularly in Europe. However, in Japan, MSI’s combined ratio deteriorated to 98.3% due to increased losses in voluntary automobile insurance and domestic natural catastrophes.
AM Best expects MSI’s rate increases on fire and voluntary automobile insurance to improve domestic underwriting performance.
MSI’s balance sheet strength reflects its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). This is supported by low financial leverage and good quality of capital. Despite exposure to equity and interest rate risks, MSI maintains a resilient capital base.
AM Best notes that MSI’s plan to accelerate the disposal of strategic equity holdings could reduce its domestic market risk exposure. The ratings also benefit from the support of MS&AD, which has a robust balance sheet and high financial flexibility.
Aioi Nissay Dowa Insurance
ADI is a major non-life insurer in Japan with strong partnerships with Toyota Motor Corporation and Nippon Life Insurance Company. Its overseas business is smaller compared to other major domestic insurers, limiting its potential for premium growth and profit diversification abroad.
ADI’s operating performance remains strong, with a five-year average return-on-equity ratio of 3.3% (fiscal years 2018-2022). In fiscal year 2023, ADI faced increased losses from voluntary automobile insurance and natural catastrophes but saw an improvement in ordinary profit due to higher investment income.
AM Best expects ADI’s domestic initiatives and realigned overseas strategy to drive future underwriting performance, with gains from equity disposals supporting the bottom line.
ADI’s balance sheet strength is assessed at the strongest level of risk-adjusted capitalisation, supported by conservative financial leverage and good quality of capital. Despite exposure to equity and interest rate risks, ADI has ample available capital to absorb such risks. AM Best expects ADI’s plan to dispose of strategic equity holdings to reduce its domestic market risk exposure.
Aioi Nissay Dowa Insurance (China)
ADIC focuses on personal lines business in China, mainly Toyota-related motor insurance. The company aims to grow by collaborating with current and prospective business partners while strengthening underwriting and control measures.
ADIC faces limited business scale and concentration risk in premium sources but benefits from parental support from ADI, AM Best said.
AM Best views ADIC’s operating performance as adequate, with a five-year operating ratio of 95% and a five-year average return-on-equity ratio of 6% (2019-2023). In 2023, ADIC’s net profit after tax was 80m yuan (US$11m), up by 49% year over year.
ADIC’s risk-adjusted capitalisation is assessed at the strongest level, supported by moderate underwriting leverage, a conservative investment strategy, and sustained growth in capital and surplus. A significant capital injection of RMB 375m from ADI in 2022 bolstered ADIC’s capital and surplus, which continued to grow in 2023.
Overall, the ratings affirmations for companies reflect their strong financial positions as well as the strategic importance of their roles within the MS&AD group.
