Best Affirms Mitsui Sumitomo Insurance ‘A+ Ratings; Outlook Stable

December 31, 2010

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and the issuer credit rating (ICR) of “aa” of Mitsui Sumitomo Insurance Company, Limited (MSI), as well as the FSR of ‘A+’ (Superior) and ICR of “aa” for the U.S. subsidiary entities of MSI: Mitsui Sumitomo Insurance Company of America (New York, NY) and Mitsui Sumitomo Insurance USA Inc. (New York, NY), whose pooled results compose Mitsui Sumitomo Insurance Group.

The outlook for all of the ratings is stable.

The ratings reflect MSI’s “superior risk-adjusted capitalization, business profile and growing overseas business. MSI’s capitalization has remained at a strong level over the past five years, although its risk-adjusted capitalization, as measured by the Japanese solvency margin ratio and Best’s Capital Adequacy Ratio (BCAR), deteriorated in fiscal years 2007 and 2008. MSI’s Japanese equity exposures, which share more than 30 percent of MSI’s invested assets, caused volatility with the deteriorating trend in capitalization.

“As MSI continued to reduce the equity exposures with the further enhancement of enterprise risk management (ERM),” Best said it “expects that MSI’s risk-based capitalization will show a favorable trend with lower volatility in the mid-term.

“MSI expects top-line growth through leveraging Sumitomo Life’s sales channels in fiscal year 2010. In addition, as a major subsidiary of MS&AD Insurance Group Holdings, Inc, which is the largest non-life insurance holding company in terms of premium income in Japan, MSI will further enhance its business profile.

“MSI plans to expand its overseas operations continuously, especially in the Asian and European markets. The company maintains one of the largest overseas networks among the Japanese non-life insurance companies. The overseas business will continue to grow in absolute volume as well as constitute a higher portion of the consolidated revenue of MSI going forward.”

As offsetting factors Best cited MSI’s “weak underwriting profitability in the domestic non-life portfolio, the stagnant Japanese non-life market and the volatility in the investment market.”

Source: A.M. Best

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