A.M. Best Affirms Credit Ratings of MS&AD Insurance Group Holdings, Inc.’s Main Operating and U.S. Subsidiaries
Concurrently,
MSI’s ratings reflect its balance sheet strength, which
MSI’s level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is at the strongest level, supported by a large adjusted capital and surplus base, and moderate underwriting leverage. The BCAR score remains at the strongest level even under stressed scenarios. As the lead rating unit of MS&AD, MSI also benefits from the group’s positive combined balance sheet strength assessment.
MSI’s operating performance has improved significantly over the past five years, and it has been one of the best performers among Japan’s major non-life insurers in underwriting and overall profitability, over the same period. The company’s five-year average return on equity is one of the highest among Japan’s major non-life insurers. Nevertheless,
MSI is fully owned by MS&AD and is, on its own, the third-largest non-life insurer in
The company’s ERM is appropriate for its risk profile. Equity investment risk, the company’s largest risk, is controlled partially through the gradual disposal of invested equities. MSI has been increasing its expertise in catastrophe risk management, and risks are mitigated by a comprehensive reinsurance program.
MSI is well-positioned at its current rating level. Negative rating actions could occur if an unfavorable trend develops in operating performance or in the event of a large-scale catastrophe that significantly impacts the company’s capitalization.
The ratings of MSI have been extended to MSIA, MSU and ADIA, as these companies hold a strategic role within the organization as
Given the extent of implied and explicit support embedded in these ratings, any upward or downward movement on the ratings of MSI would likely influence the ratings of MSIA, MSU and ADIA. Any material changes to MS&AD financial condition or its commitment in the
The ratings of ADI reflect its balance sheet strength, which
ADI’s risk-adjusted capitalization, as measured by BCAR, is at the strongest level and supported by the company’s moderate underwriting leverage. Although ADI has a high proportion of equity investments, its risk-adjusted capitalization remains at the strongest level under equity stress scenarios. High exposure to domestic natural catastrophes is addressed by the company’s appropriate reinsurance program.
ADI has reported profitable operating performance in recent years. Although underwriting performance has improved over the past five years, volatility remains moderate, as evidenced by the negative impact of large losses from overseas natural disasters in fiscal year 2017. On the expense side, maintenance costs have been on a declining trend, driving the expense ratio lower. Nevertheless, the company’s overall profitability, as measured by adjusted return on equity, continues to trail its peers.
Most of ADI’s business is concentrated in its domestic market, where it is one of the four-largest players in terms of net premium written. The company benefits from its long-standing business relationship with
ERM is considered appropriate to ADI’s risk profile and is managed by MS&AD. ADI’s major business is auto insurance, a product line in which it has expertise. Its largest risk is investment risk; to manage this, ADI has been gradually disposing of its invested equities.
ADI is one of the major operating subsidiaries of MS&AD. Many of the company’s operations, such as ERM, corporate functions and part of product development, are integrated into MS&AD.
ADI is well-positioned at its current rating level. Negative rating actions could occur if there is a significant deterioration in operating profitability or an unfavorable trend develops in operating performance. Negative rating actions also could occur in the event of a large-scale catastrophe that significantly impacts the company’s capitalization.
The ratings of ADIC reflect its balance sheet strength, which
ADIC receives a high level of support from its parent in the form of business generation and capital injections. The strong business relationship between ADI and
Partially offsetting rating factors include ADIC’s business concentration risks, as the motor reinsurance inward business accounts for the majority of ADIC’s underwriting book. In addition, uncertainties in the political and regulatory environment in
Positive rating actions could occur if ADIC continues to demonstrate favorable and stable operating results while improving its risk-adjusted capitalization by retaining profits.
Negative rating actions could occur if there is material deterioration in the company’s risk-adjusted capitalization due to faster-than-forecast premium growth or an adverse deviation from its forecast underwriting performance.
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
Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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