AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of "aa-" of Sompo Japan Insurance Inc. (SJ) (Japan). The outlook of these Credit Ratings (ratings) is stable.
AM Best also has affirmed the FSR of A+ (Superior) and the Long-Term ICR of "aa-" of the operating subsidiaries of Sompo International Holdings Ltd. (SIH) (Pembroke, Bermuda). Concurrently, AM Best has affirmed the Long-Term ICR of "a" of SIH, an intermediate holding company for this group. Also, AM Best has affirmed the Long-Term Issue Credit Ratings (Long-Term IRs) of "a-" which are guaranteed by SIH. The outlook of all of these Credit Ratings (ratings) is stable. (See below for a detailed list of companies and Long-Term IRs.).
The ratings reflect SJ’s balance sheet strength, which AM Best categorises as strongest, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management (ERM).
SJ’s balance sheet strength assessment reflects the company’s strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). Although there was a decline in available capital mainly as a result of financial market volatility, this impact was partially offset by the company reducing risk through a continued divestment of its strategic holdings during fiscal-year 2019.
SJ has a track record of strong performance, with an average five-year combined ratio of 93% (fiscal years 2015-2019) when excluding the premium and associated claims from its compulsory automobile liability insurance business. Its underwriting performance in recent years has deteriorated mainly due to the increased frequency of severe natural catastrophe events in Japan. In fiscal-year 2019, however, underwriting performance improved with a lower private insurance combined ratio as a result of a decrease in net losses incurred from domestic natural catastrophes when compared with fiscal-year 2018.
SJ is the core operating unit of the SOMPO Holdings, Inc., (SOMPO Holdings), the ultimate parent and one of the largest non-life insurance groups in Japan. The group maintains a market-leading position and accounts for one quarter of Japan’s non-life market in terms of net written premium. In addition, the group also has a growing oversea portfolio that comprised 18% of SOMPO Holdings’ consolidated net premium written in fiscal-year 2019.
The rating affirmations of SIH and its subsidiaries reflect the balance sheet assessment at the strongest level, adequate operating performance, neutral business profile and appropriate ERM. Additionally, SIH benefits from SJ’s explicit financial support in the form of a net worth maintenance agreement and thus receives additional rating enhancement.
Negative rating actions could occur if there is a material decline in SJ’s risk-adjusted capitalisation due to a significant investment impairment, or an erosion of capital from the higher frequency of large-scale catastrophe events. Negative rating actions could also occur if there is significant deterioration in SOMPO Holdings’ credit profile, including its risk-adjusted capitalisation, financial leverage or interest coverage levels.
The FSR of A+ (Superior) and the Long-Term ICRs of "aa-" have been affirmed with a stable outlook for the following subsidiaries of Sompo International Holdings Ltd.:
- Endurance Specialty Insurance Limited
- Endurance Assurance Corporation
- Endurance Worldwide Insurance Limited
- Endurance American Specialty Insurance Company
- Endurance American Insurance Company
- Endurance Risk Solutions Assurance Co.
- American Agri-Business Insurance Company
- Sompo America Insurance Company
- Sompo America Fire & Marine Insurance Company
- Lexon Insurance Company
- Bond Safeguard Insurance Company
The following Long-Term IRs have been affirmed with a stable outlook:
Sompo International Holdings Ltd.—
-- "a-" on $335 million 7% senior unsecured notes, due 2034 (issued by Endurance Specialty Holdings Ltd. and guaranteed by Sompo International Holdings Ltd.)
-- "a-" on $300 million 4.7% senior unsecured notes, due 2022 (issued by Montpelier Re Holdings Ltd. and guaranteed by Sompo International Holdings Ltd.)
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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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