Best Assigns Aioi Insurance Company (China) ‘A-‘ Rating; Outlook Stable

A.M. Best Co. has assigned a financial strength rating of ‘A-‘ (Excellent) and an issuer credit rating of “a-” to Aioi Insurance Company (China) Limited, both with stable outlooks.

The ratings reflect AIC’s “favorable risk-adjusted capitalization, excellent liquidity position and strong operational support from the parent, Aioi Nissay Dowa Insurance Company Limited, including business generation and reinsurance,” Best explained. The rating agency added that it also recognizes the company’s “experienced management team, who has extensive experience in the insurance industry and previously worked in various capacities in insurance companies.

“AIC’s underwriting and asset risks are comfortably supported by its overall level of capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The company benefited from the parental support through two additional capital contributions since it began operations in June 2007, to facilitate operations and to support future business growth.

“Net premium leverage stood at 0.15 times for 2009 and is expected to increase to a level of around 1.00 times through 2012” best said it believes the company’s “prospective risk-adjusted capitalization will remain adequate to absorb its projected premium growth and anticipates that the company will benefit from continued parental support when capital needs arise.

“AIC’s overall operating results have steadily improved over the years, due largely to the favorable underwriting performance of its Japanese interest abroad business in China (which accounted for 99.5 percent of the total premiums written as of the first half period ending June 30, 2010), along with stable streams of investment earnings. The company has a very conservative investment strategy, with all investments in cash and fixed deposits, which allows AIC to have stable, albeit modest, streams of interest income in future periods.

Best added that “while AIC is maintaining its existing Japanese customer base, it will broaden its premium sources through leveraging the strong business relationship between its parent company and Toyota Motor Corporation, as well as its partnership with local insurance companies for potential growth opportunities in non Japanese-related business going forward.”

As partial offsetting factors best cited “the high level of set-up expenses associated with the relatively new book of business and the execution risk related to projected premium growth. In view of the increasingly competitive insurance environment, A.M. Best believes challenging market conditions and the three-year operating history with a limited underwriting track record could place pressure and execution risk on AIC to meet its anticipated break-even period in three years.”

Source: A.M. Best

Topics Trends Carriers China Japan