Best Affirms Aioi ‘A’ Rating

A.M. Best Co. announced that it has affirmed the financial strength rating of “A” (Excellent) of Japan’s Aioi Insurance Company Ltd. with a stable outlook.

“The rating reflects Aioi’s excellent market profile, strong risk-adjusted capitalization and quality investment portfolio,” said Best. “The rating also considers the company’s competitive position in the motor insurance market in Japan.”

Best noted: “Aioi Insurance is one of the five largest general insurers in Japan with premium market share of 11 percent as of fiscal year 2003. The company continues to maintain a competitive position in the motor insurance market and benefits from its close business affiliation with its largest shareholder, Toyota Motor Corp.

“The Best’s Capital Adequacy Ratio (BCAR), which measures capitalization on a risk-adjusted basis, indicates that the company is strongly capitalized. Aioi’s local solvency ratio has improved to 910 percent in fiscal year 2003 from 683 percent in fiscal year 2002. Given its relatively small maturity refund business, the company’s exposure to negative interest spread is also contained.

“The company’s investment portfolio is well-diversified with high quality asset classes. Improved investment return is generated due to robust recovery in the Japanese equity market in fiscal year 2003.”

Best cited “Aioi’s relatively high combined ratio as compared to its close peers, the ongoing intense competition within the non-life insurance marketplace, as well as the typhoon losses in fiscal year 2004” as offsetting factors.

The bulletin also indicated that Aioi recorded an incurred loss ratio of 61 percent in fiscal year 2003. “Although the expense ratio is slightly improved to 36 percent from 37 percent in fiscal year 2002, the combined ratio of 97 percent is relatively higher than the average ratio for the other four leading non-life insurers in Japan in fiscal year 2003.

“The competition in Japan’s non-life insurance market remains intense due to the deregulation and liberalization of the financial services industry. The typhoon losses further exert pressure on the company’s earnings capability.”

Topics Market Japan