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A.M. Best Withdraws Credit Ratings of NIPPONKOA Insurance Company (China) Limited

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A.M. Best has downgraded the Financial Strength Rating to B++
(Good) from A- (Excellent) and the Long-Term Issuer Credit Rating to
"bbb" from "a-" of NIPPONKOA Insurance Company (China) Limited
(NKC) (China). The outlook of these Credit Ratings (ratings) is stable.
Concurrently, A.M. Best has withdrawn the ratings upon management's
request to no longer participate in A.M. Best's interactive rating
process.

The ratings of NKC reflect its balance sheet strength, which A.M. Best
categorizes as very strong, as well as its marginal operating
performance, limited business profile and appropriate enterprise risk
management.

The rating actions reflect a considerable deterioration in NKC's
underwriting performance in light of two large-scale loss events in
2017, which led to a significant adverse deviation in the company's
profitability from its business plan. NKC's high net retention level
relative to its capital and surplus and high expense ratio have led to
volatile underwriting results and operating losses that caused a
substantial decline in the company's capital and surplus. In addition,
uncertainty regarding its scheduled merger with Sompo Japan Nipponkoa
Insurance (China) Co., Ltd.
(SJC), which has been pending regulatory
approval since 2014, limits the company's growth and business profile.

Positive offsetting rating factors include NKC's solid balance sheet, as
well as conservative and liquid investment portfolio. The company
receives a wide range of support from its parent, Sompo Japan
Nipponkoa Insurance Inc.
(SJNK), in terms of business generation,
reinsurance, risk management and operations. In addition, NKC
strengthened its underwriting guidelines in 2017 and joined an
additional quota-share reinsurance arrangement with its parent in April
2018 to reduce volatility in its underwriting performance and
capitalization.

Positive rating actions could occur if the merger between NKC and SJC
takes place and creates synergy, leading to an enhanced business profile
or improved operating performance of the consolidated entity. Negative
rating actions could occur if there is substantial decline in NKC's
risk-adjusted capitalization due to operating performance deterioration.

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 A.M. Best press releases, please view
Guide
for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating
Action Press Releases
.

A.M. Best is the world's oldest and most authoritative insurance
rating and information source. For more information, visit
www.ambest.com.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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