News Non-Life11 Jun 2024

Japan:Growing premium income sustains Mitsui Sumitomo Insurance's operating results

| 11 Jun 2024

Japanese insurance giant Mitsui Sumitomo Insurance's (MSI) operating performance has remained strong, said AM Best. It also said that this assessment continues to be supported by the company's consistent trend of steadily growing premium income in the past and a five-year average adjusted return-on-equity ratio of 5.4% (fiscal years 2018-2022), as calculated by the global credit rating agency.

In fiscal year 2023 (the financial year ended 31 March 2024), MSI’s overseas business demonstrated significant improvements, including growth in net premium written (NPW) across diverse regions and notable enhancements in underwriting performance, particularly in Europe, compared with the previous year. In its domestic market of Japan, MSI’s combined ratio slightly deteriorated to 98.3%, impacted by increased losses in voluntary automobile insurance and domestic natural catastrophes. However, AM Best expects that the company’s initiatives, such as rate increases on fire insurance and voluntary automobile insurance, will improve its domestic underwriting performance.

AM Best has affirmed MSI’s Financial Strength Rating (FSR) of ‘A+’ (Superior) and Long-Term Issuer Credit Rating (Long-Term ICR) of ‘aa’ (Superior). Concurrently, AM Best has affirmed the FSR of ‘A+’ (Superior) and the Long-Term ICRs of ‘aa’ (Superior) of MSI’s US operating companies, which are domiciled in New York: 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 (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 (ADIC).

The outlook of all the aforementioned credit ratings is ‘Stable’. These companies are owned ultimately by MS&AD Insurance Group Holdings (MS&AD), a major non-life insurance group based in Japan.

The ratings of MSI reflect the group’s 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 and good quality of capital.

Although the company is exposed to considerable equity risk from its substantial domestic stock investments and potential interest rate risk associated with its sizeable bond investments, it maintains a resilient capital base capable of absorbing such risks.

That said, AM Best expects that the company’s plan to accelerate disposal of strategic equity holdings could potentially reduce its overall exposure to domestic market risk in coming years. The ratings also reflect the favourable impact of MS&AD as the ultimate parent, which has robust balance sheet strength that is supported by ample available capital, low financial leverage and high level of financial flexibility, enabling MSI to have good access to capital and debt markets.

Business profile

MSI remains a prominent insurer with a strong reputation in Japan’s highly consolidated non-life insurance sector, in which it continues to hold approximately one-fifth of the market share based on NPW, along with its leading and stable market position. The company’s overseas insurance business, which contributes approximately 30% of its consolidated net premium income, also presents a significant opportunity for profit diversification.

| Print
Enter the code shown above in the box below.

Note that your comment may be edited or removed in the future, and that your comment may appear alongside the original article on websites other than this one.


Recent Comments

There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.

Other News

Follow Asia Insurance Review