A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit rating (ICR) of "a+" of Aioi Nissay Dowa Insurance Company Limited (ADI) (Japan) and its subsidiary, Aioi Nissay Dowa Insurance Company of America (ADIA) (New York, NY).

According to a release on June 12, A.M. Best also has affirmed the FSR of A- (Excellent) and the ICR of "a-" of ADI's subsidiary, Aioi Nissay Dowa Insurance (China) Company Limited. (ADIC). The outlook for all ratings is stable.

The ratings reflect ADI's market presence in both the Toyota and Nissay markets, expected improvement in operating performance and reduction in its risk exposure in its investment portfolio. A.M. Best acknowledges ADI receives implicit and explicit support from its parent company, MS&AD Insurance Group Holdings, Inc.

ADI maintains its position in the Toyota and Nissay markets, established by the key shareholders of MS&AD Insurance Group Holdings, Inc., which is expected to report growth going forward. ADI is expected to benefit from an improvement in operating performance driven by improving auto underwriting results and a reduction in its system development cost as the consolidation processes between the previous business units of Aioi and Nissay Dowa are to be completed. It is also anticipated that ADI will continue to scale back the investment into the stock, which could stabilize the capital position under the volatile stock market conditions. Furthermore, ADI, as a group company of MS&AD Insurance Group Holdings, Inc., continues to benefit from the relationship with group companies as well as business alliance partners to further grow in the domestic and overseas non-life markets.

Offsetting factors are the deterioration in ADI's capitalization as it was hit by a large scale of natural catastrophe events including the Japan earthquake and the Thai floods in the past two years, in addition to weak financial market conditions. Although the company has continued to reduce its exposure to the stock market, the investment leverage remains relatively high due to the substantial decline in its capital and surplus in the past two years. ADI's capital and surplus declined by JPY 229 billion to JPY 687 billion in the past two years. ADI is exposed to catastrophe risks such as earthquakes, tsunamis and floods in both the domestic and overseas markets.

The ratings of ADIA are based on its stand-alone capitalization, role and strategic importance to ADI, the explicit parental support provided by ADI in the form of a reinsurance program and contributed capital, and the implied support of future parental commitment.

Downward rating pressures could arise if there is an adverse impact to the risk-adjusted capitalization, material deterioration in operating performance and a worsening Japanese economy.

A.M. Best Company is an insurance rating and information source.

More information:

www.ambest.com

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