A.M. Best Co. has upgraded the financial strength rating to “A-” (Excellent) from “B++” (Very Good) and assigned an issuer credit rating (ICR) of “a-” to Japan’s Fuji Fire & Marine Insurance Company, Limited. Best also revised its outlook from positive to stable.
“The ratings reflect Fuji Fire’s improved capitalization, stable operating performance and well-covered catastrophe exposure,” said Best. “Fuji Fire’s risk adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), has been improving over the past 5 years. This is mainly due to increased capital & surplus and catastrophe reserves. The company has enhanced the financial soundness of its asset portfolio by disposing of equity shares, writing off bad debts and decreasing risk-monitored loan receivables and investing in fixed income assets for a more stable earning income structure.
“Similar to the improving trend in BCAR, the company’s local solvency ratio improved from 799 percent in fiscal year 2004 to 833 percent in fiscal year 2005. A.M. Best believes that Fuji Fire’s risk-adjusted capitalization will continue to remain stable given the current operating performance and capital position.”
Best also noted that the “Company has maintained a stable operating performance. Underwriting performance has improved across almost all business lines, with total net claim payments (including loss adjustment expenses) decreasing by about 3 percent in fiscal year 2005. Fuji Fire’s combined ratio has been consistently maintained under 100 percent over the past four years. Aligned with its corporate strategy to focus more on the personal accident and fire line businesses, Fuji Fire recorded a noticeable net premium growth in these respective business lines. Fuji Fire’s expense ratio has also been maintained due to its cost reduction plan.
“Fuji Fire’s catastrophe exposure is also well-protected. The company’s catastrophe reserves, combined with its reinsurance programs, are comprehensive enough to cover the company’s total net probable maximum loss (PML).
“Partially offsetting rating factors include the intensified market competition and relatively weak distribution channels.
“As of fiscal year 2004, Fuji Fire is the 8th largest player in the domestic non-life insurance market with a gross premium market share of about 4 percent. With the top five companies representing over 80 percent of the market share, Fuji Fire might find it a challenging factor to increase its small market presence by strengthening its sales growth in its portfolio.
“Compared to other major non-life insurers, Fuji Fire has relatively weaker distribution channels with no strong business alliances with major financial groups. This could potentially limit revenue growth with comparatively fewer business partnerships. “
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