Market Overview

A.M. Best Affirms Credit Ratings of Tokio Marine & Nichido Fire Insurance Co., Ltd. and Its U.S. Subsidiaries


A.M. Best has affirmed the Financial Strength Rating (FSR) of A++
(Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of
"aa+" of Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF) (Japan)
and its U.S. subsidiaries. The outlook of these Credit Ratings (ratings)
is stable. (See below for a detailed listing of the companies.)

A.M. Best also has affirmed the FSR of A+ (Superior) and the Long-Term
ICR of "aa-" of Tokio Marine Pacific Insurance Limited (TMPI) (Guam),
which is a wholly owned subsidiary of TMNF. The outlook of these ratings
is stable.

The ratings reflect TMNF's balance sheet strength, which A.M. Best
categorizes as strongest, as well as its strong operating performance,
very favorable business profile and very strong enterprise risk
management (ERM).

TMNF's balance sheet strength is due in part to its risk-adjusted
capitalization being at the strongest level, as measured by Best's
Capital Adequacy Ratio (BCAR). This is supported by a large adjusted
capital base, which consists of reported capital, catastrophe loss
reserves and price fluctuation reserves. While TMNF's underwriting
leverage is considered conservative, the major strain on TMNF's BCAR
score stems from its investment allocation. Nevertheless, the company
has maintained a significant amount of adjusted capital relative to the
equity price risk associated with such securities.

Despite the impact of natural catastrophes and some large losses, TMNF
has continued to generate positive operating profits for fiscal-year
2018. This is underpinned by a solid underwriting margin within its
domestic non-life business and a stable stream of interest and dividend
income from its investment portfolio. While operating performance
deteriorated in the fiscal year ended March 31, 2018, A.M. Best notes
that a number of one-off factors drove the deterioration, including
natural catastrophes. Prospectively, in the absence of these one-off
factors, A.M. Best expects that underwriting and operating performance
will revert to a strong level.

TMNF is a major non-life insurer in Japan, and its business profile
benefits from its strong competitive market position and excellent
product and geographical diversification. The company maintains a market
leading position, capturing more than 25% of total domestic market share
while demonstrating stable operating trends. Additionally, TMNF has a
high-quality book of overseas insurance business, which now accounts for
a sizable portion of its premium revenue and overall earnings. A.M. Best
believes that TMNF's strong franchise value, considerable scale and
diversified operations will help it navigate challenging market
conditions while enhancing its earnings stability over the medium to
long term.

A.M. Best believes TMNF's ERM program is very effective in managing its
group-wide exposure to potential earnings and capital volatility while
maximizing its value to various stakeholders, even as the company
becomes increasingly globalized. A sophisticated risk management
framework is embedded throughout the organization, and the company's
risk management capabilities are superior and broadly in line with the
highly complex and diverse risk exposures.

The stable outlooks reflect A.M. Best's view that TMNF will continue to
maintain strong business trends in its domestic non-life business, as
well as developing its overseas insurance business in a prudent manner.
Negative rating actions could occur if there is a material decline in
TMNF's risk-adjusted capitalization due to a consistent deterioration in
the company's operating performance or a negative impact from
large-scale catastrophe events.

The ratings of TMPI reflect its balance sheet strength, which A.M. Best
categorizes as very strong, as well as its strong operating performance,
neutral business profile and appropriate ERM. The ratings also reflect
the wide range of support TMPI receives from its parent, TMNF.

TMPI holds a very strong balance sheet consisting of high quality assets
and a conservative investment portfolio. Capital and surplus grew
steadily and organically in the past 10 years from consistently positive
profit retention under a low operating expense structure. Despite its
relatively high underwriting leverage, TMPI maintains a low product risk
profile, as the majority of the company's revenue comes from
short-tailed group accident and health (A&H) products with
high-frequency, low-severity claims. The company holds a solid leading
position in Guam's A&H market through a strong distribution partnership
with its exclusive managing general agent, Calvo's Insurance
Underwriters. In addition, TMPI receives various support from TMNF and
its affiliates including brand recognition, capital, reinsurance, risk
management and operational support.

Offsetting rating factors include TMPI's concentration risk in the A&H
business line, in particular with the Guam government's health plan
account, which has been a major source of revenue and is subject to
renewal on an annual basis, as well as the company's geographic
concentration in Guam where soft market conditions continue to pose
challenges to underwriting profitability. TMPI also is exposed to
regulatory risks including political uncertainties and potential
regulatory fees that could impact the company's bottom-line performance.

While positive rating actions are unlikely in the near term, negative
rating actions could occur if there is significant deterioration in the
company's operating performance or a material decline in its
risk-adjusted capitalization. Negative rating actions could also occur
if there is a material decline in the company's A&H profitability or
market share in Guam, or if there is a reduced level of support from

The FSR of A++ (Superior) and the Long-Term ICRs of "aa+", each with a
stable outlook, have been affirmed for the following subsidiaries of
Tokio Marine & Nichido Fire Insurance Co., Ltd.:

  • Tokio Marine America Insurance Company
  • Trans Pacific Insurance Company
  • TM Specialty Insurance Company
  • TNUS Insurance Company

Ratings are communicated to rated entities prior to publication.
Unless stated otherwise, the ratings were not amended subsequent to that

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
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
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