Fitch Ratings has upgraded the insurer financial strength (IFS) ratings of Japanese insurer Mitsui Sumitomo Insurance to “A+” (Strong) from “A”.
Fitch also affirmed MSI’s issuer default rating (IDR) of “A” and the rating on its subordinated debt at “A-“. The “under criteria observation” status on the ratings has also been removed.
Key Rating Drivers
MSI’s ratings reflect its parent MS&AD Insurance Group’s favorable business profile as it has a leading market share in the non-life market in Japan, and a well-diversified business portfolio that includes domestic life and an overseas business that has substantial franchises in many countries.
The rating also factors in MSI’s strong capitalization and financial performance. MSI is the core non-life insurance subsidiary of MS&AD Group.
Fitch expects MSI and MS&AD Group to maintain strong capital buffers, which mitigate high investment risks at MSI. MS&AD Group maintained high consolidated statutory solvency margin ratio (SMR) of 832 percent at end-September 2018, similar to the 819 percent at end-March 2018.
MSI’s and MS&AD Group’s capital adequacy are particularly sensitive to stock-market performance due to a high level of strategic shareholdings held at the domestic non-life businesses, Fitch explained.
MSI’s FYE19 underwriting performance will be affected by high incurred losses from domestic weather-related losses, said Fitch, noting that MSI expects a combined ratio, excluding residential earthquake insurance and compulsory automobile business insurance, to rise to 100 percent in FYE19, from 92 percent in FYE18.
However, apart from catastrophe losses, Fitch expects MSI to maintain strong non-life underwriting results, due to pricing adjustments in its mainstay automobile business lines.
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