AM Best Affirms Credit Ratings of Mitsui Sumitomo Insurance Company, Limited and Its Affiliates

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 Mitsui Sumitomo Insurance Company, Limited (MSI) (Japan). Concurrently, AM Best has affirmed the FSR of A+ (Superior) and the Long-Term ICRs of “aa” (Superior) of MSI’s U.S. operating companies, which are domiciled in New York, NY: Mitsui Sumitomo Insurance Company of America, Mitsui Sumitomo Insurance USA Inc. and MSIG Specialty Insurance USA Inc.

In addition, AM Best has affirmed the FSR of A+ (Superior) and the Long-Term ICR of “aa” (Superior) of Aioi Nissay Dowa Insurance Company Limited (ADI) (Japan). AM Best also has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of Aioi Nissay Dowa Insurance (China) Company Limited (ADIC) (China). The outlook of all the aforementioned Credit Ratings (ratings) is stable. These companies are owned ultimately by MS&AD Insurance Group Holdings, Inc. (MS&AD).

The ratings of MSI 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).

MSI’s balance sheet strength mainly reflects its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). This assessment is also supported by the company’s low financial leverage. Although the company is exposed to considerable equity risk from its substantial domestic stock investments as well as potential interest rate risk associated with its sizeable bond investments, it maintains a robust and resilient capital base capable of absorbing such risks. However, AM Best expects that MSI’s announced plan to accelerate disposal of strategic equity holdings and diversify its investment portfolio will gradually reduce its overall exposure to domestic market risk in the forthcoming years. The balance sheet strength assessment also reflects the favourable impact of MS&AD, which has robust absolute capital and a high level of financial flexibility, enabling MSI to have good access to capital markets.

MSI’s operating performance has remained strong; this assessment continues to be supported by the company’s consistent trend of steady premium growth and an average adjusted return-on-equity ratio of 6.7% over the last five fiscal-years (2019–2023), as calculated by AM Best. In fiscal-year 2024, the company delivered improved domestic underwriting profitability despite ongoing claims cost pressures in the voluntary automobile insurance, benefiting from rate hikes across key business lines and lower domestic natural catastrophe losses. Its overseas businesses also demonstrated notable growth, with MS Amlin AG Insurance achieving substantial improvements in insurance service profit while MS Amlin Underwriting Limited, a Lloyd’s syndicate, maintained profitability despite major loss events. AM Best expects continued enhancement of MSI’s overseas operations, driven by the sustained profitability turnaround in the reinsurance business in Europe and accelerating growth in the U.S. market following recent acquisitions. Meanwhile, the stable performance of its domestic business is expected to continue providing a solid foundation for the group’s overall operating performance.

MSI remains a prominent insurer with a strong reputation in Japan’s highly consolidated non-life insurance sector, in which it continues to hold its leading and stable market positions underpinned by approximately one-fifth of the market share. The company’s overseas operations, contributing approximately 40% of its consolidated net premium income through European subsidiaries and recent acquisitions in the U.S. specialty market, provides significant earnings diversification and growth prospects. AM Best expects the planned merger with ADI in April 2027 to strengthen MS&AD’s competitive position by combining MSI’s commercial business capabilities with ADI’s retail distribution strength, though integration risks remain.

The ratings of ADI reflect its balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate ERM. The ratings also consider ADI’s strategic importance to its parent company, MS&AD Insurance Group Holdings, Inc., (MS&AD) as one of its two core operating entities and integral role in the group.

ADI’s balance sheet strength assessment reflects the company’s strongest level of risk-adjusted capitalisation, as measured by BCAR, conservative financial leverage and good quality of capital. The company is exposed to considerable equity risk from its substantial domestic stock investments as well as potential interest rate risk associated with its sizeable bond investments, but it maintains a sizeable capital base to cushion against such risks. However, AM Best expects that ADI’s ongoing plan to accelerate the reduction of domestic stock holdings will allow it to gradually reduce overall exposure to domestic market risk while diversifying its investment portfolio in the forthcoming years.

ADI’s operating performance has remained solid, supported by its stable premium income and a five-year average return-on-equity ratio of 4% (fiscal-years 2019-2023), as calculated by AM Best. Despite ongoing claims cost pressures in voluntary automobile insurance in fiscal-year 2024, ADI’s domestic operations delivered improved ordinary profit, supported by higher premium income, reduced domestic natural catastrophe losses and substantial gains from disposal of strategic equity holdings. Its overseas business, although not material to the company’s overall performance, showed partial recovery with reduced losses in Europe due to lower natural catastrophes and active portfolio restructuring. Prospectively, AM Best expects ADI’s continued underwriting initiatives in the domestic market and realigned overseas business strategy will drive solid underwriting performance, with realised gains from strategic equity disposals that are expected to provide support to its bottom line in the forthcoming years.

ADI remains a major non-life insurer in Japan with a strong reputation and solid market position. The company’s domestic non-life insurance business continues to benefit from its longstanding partnerships with Toyota Motor Corporation (Toyota) and Nippon Life Insurance Company. Meanwhile, ADI’s overseas business remains comparatively modest in scale compared to its major domestic counterparts and primarily focused on Toyota-related auto business, which limits potential for revenue and profit diversification in overseas markets.

The ratings reflect ADIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM. The ratings also reflect the company’s strategic importance to its parent, ADI, as a contributor to its overseas business footprint and a major component of ADI’s business expansion in China.

AM Best assesses ADIC’s risk-adjusted capitalisation at the strongest level, as measured by BCAR, supplemented by its stable capital position, conservative investment strategy and moderate underwriting leverage. ADIC’s capital and surplus remained at a healthy level in 2024, supported by positive earnings, albeit offset by a dividend payout.

AM Best views ADIC’s operating performance as adequate, as demonstrated by a five-year average operating and return-on-equity ratios of 95.4% and 5.2% (2020-2024), respectively. In 2024, ADIC’s net profit after tax was RMB 41.8 million (USD 5.7 million), mainly supported by positive investment results, while underwriting results reached the break-even point.

ADIC focuses on personal lines business in China, primarily Toyota-related motor insurance sourced from inward reinsurance business, which has a high-frequency, low-severity nature. Going forward, the company will continue to strengthen underwriting and implement adequate control activity measures to ensure its stable underwriting performance, while exploring opportunities for greater collaboration with its current and prospective business partners to achieve top-line growth.

Partially offsetting rating factors include ADIC’s limited business scale in China’s non-life insurance market and considerable concentration risk in premium source, despite being partly mitigated by its close ties with ADI and major distribution partners. Notwithstanding, the company continues to benefit from parental support in terms of brand recognition, capital, reinsurance, human resources and operations.

Negative rating actions for MSI could occur if there is material deterioration in its balance sheet fundamentals, such as a significant decline in its risk-adjusted capitalisation caused by substantial investment losses or large-scale natural catastrophes, or if there is persistent and significant deteriorations in its operating performance stemming from weak underwriting and investment results. Negative rating actions could also occur if there is significant deterioration in the credit profile of MS&AD, including its risk-adjusted capitalisation, financial leverage or interest coverage levels. Positive rating actions could occur if MSI further enhances its business profile to exhibit an indisputable market leadership with strong brand recognition in domestic and overseas markets.

Negative rating actions for ADI could occur if there is material deterioration in its operating performance in a sustained manner, stemming from weak underwriting and investment results, or if there is material deterioration in balance sheet fundamentals, such as a significant decline in risk-adjusted capitalisation caused by substantial investment losses or large-scale natural catastrophes. Negative rating actions could also occur if there is significant deterioration in the credit profiles of MS&AD or MSI, including their risk-adjusted capitalisations, financial leverages or interest coverage levels. Positive rating actions could occur if ADI demonstrates sustained improvement in its balance sheet strength metric including its risk-adjusted capitalisation.

Positive rating actions for ADIC could occur if there is a sustained and notable improvement in the company’s underwriting and operating profitability. Negative rating actions could occur if there is a substantial deterioration in ADIC’s risk-adjusted capitalisation, for example, due to a material deviation from its business plan. Negative rating actions also could arise if there is a reduced level of support from ADI.

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 AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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Charles Chiang
Senior Financial Analyst

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Aaron Li
Associate Financial Analyst

+852 2827 3426

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Joni Cerbone
Senior Financial Analyst

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Christopher Sharkey
Associate Director, Public Relations

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Al Slavin
Senior Public Relations Specialist

+1 908 882 2318

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Source: AM Best