A.M. Best Affirms Credit Ratings of Sompo Japan Nipponkoa Insurance Inc. and Its Subsidiaries

15-Jul-2017 Intellasia | BusinessWire | 12:31 AM Print This Post

HONG KONG–(BUSINESS WIRE)–A.M. Best has affirmed the Financial Strength Rating (FSR) of A+
(Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of
“aa-” of Sompo Japan Nipponkoa Insurance Inc. (SJNK) (Japan).
A.M. Best also has affirmed the FSR of A- (Excellent) and the Long-Term
ICR of “a-” of SJNK’s subsidiary, NIPPONKOA Insurance Company (China)
Limited
(NKC) (China). The outlook of these Credit Ratings (ratings)
remains stable.

Concurrently, A.M. Best has affirmed the FSR of A+ (Superior) and the
Long-Term ICRs of “aa-” of Sompo America Insurance Company (SAIC)
and its reinsured affiliate, Sompo America Fire & Marine Insurance
Company
(SAFM), collectively known as Sompo Japan US
Group (both domiciled in New York, NY). The outlook for each of these
ratings remains stable. Additionally, A.M. Best has affirmed the FSR of
A- (Excellent) and the Long-Term ICR of “a-” of Canopius US
Insurance, Inc.
(Canopius US) (Wilmington DE). The outlook of each
of these ratings remains negative.

Furthermore, A.M. Best has affirmed the FSR of A+ (Superior) and the
Long-Term ICRs of “aa-” of Endurance Specialty Insurance Ltd.
(Endurance) (Bermuda) and its subsidiaries. A.M. Best also has affirmed
the Long-Term ICR of “a-” and the Long-Term Issue Credit Ratings
(Long-Term IRs) of Endurance Specialty Holdings Ltd. (Bermuda).
The outlook of these ratings is stable. (See below for a detailed list
of the companies and the Long-Term IRs.)

SJNK’s ratings reflect the company’s robust level of risk-adjusted
capitalization, stabilized operating performance and favorable business
profile. SJNK’s risk-adjusted capitalization, as measured by Best’s
Capital Adequacy Ratio (BCAR), remains strong despite the negative
impact of the goodwill from its $6.3 billion acquisition of Endurance
Insurance, Ltd. The company also maintains an adequate level of
financial leverage. SJNK has stabilized its operating performance over
the past three years owing to the improved underwriting results in its
domestic non-life businesses, tighter control over catastrophe risks and
a continuous reduction in equity investments. In addition, the growing
contribution from the overseas businesses supports further stabilization.

Partially offsetting rating factors are the potential volatility in
capitalization driven by changing financial market conditions and the
company’s moderate exposure to catastrophe risks.

Positive rating actions could occur if SJNK further stabilizes its
performance by diversifying its risk profile and earnings sources.
Negative rating actions could occur if there is material deterioration
in its risk-adjusted capitalization due to a significant decline in
operating performance. Potential large-scale catastrophe events or a
failure to successfully integrate its recent acquisition also could
cause downward ratings pressure if capital levels are affected
significantly.

NKC’s ratings reflect its strong risk-adjusted capitalization and the
wide range of support from its parent company. NKC’s risk-adjusted
capitalization remains strong due to its low underwriting leverage and
conservative investment portfolio. NKC is scheduled to merge with Sompo
Japan Nipponkoa Insurance (China) Co., Ltd.
(SJC), pending
regulatory approval.

A partially offsetting rating factor is NKC’s volatile operating
performance. Although the company reported positive returns over the
past two years, performance remains susceptible to large-scale losses,
given that NKC mainly focuses on writing commercial risks for Japanese
corporate clients.

While positive rating actions are unlikely, negative rating actions
could occur if there is a material decrease in NKC’s risk-adjusted
capitalization due to considerable deterioration in operating
performance. Negative rating actions also could occur in the event of a
large-scale catastrophe event that significantly impacts capitalization.

The ratings of SAIC and SAFM are based on their role and strategic
importance to SJNK, along with explicit support provided by SJNK in the
form of quota share reinsurance. The ratings also reflect the implied
support to be provided by SJNK in the future for the group’s U.S.
operations.

The continued negative outlook of Canopius US is primarily due to the
execution risk as the company takes strategic initiatives to address
financial performance. Significant actions have been implemented to
address the underlying operating performance. Nonetheless, a sufficient
period of time must elapse to determine sustainability of an improving
trend. These rating factors are offset by Canopius US’ supportive
risk-adjusted capitalization, the recognition of its importance within
the Sompo Canopius Group and ultimately as part of the Sompo Japan US
Group.

The affirmation of Endurance Specialty Insurance Ltd. reflects its
strong level of risk-adjusted capitalization, solid operating
performance, experienced management team and its strong enterprise risk
management program, as well as further geographic diversification
following its acquisition by SJNK earlier this year. Additionally,
Endurance benefits from explicit financial support from SJNK in the form
of a net worth maintenance agreement.

The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” have been
affirmed with a stable outlook for the following subsidiaries of Endurance
Specialty Insurance Ltd.
:

  • Endurance Assurance Corporation
  • Endurance Worldwide Insurance Limited
  • Endurance American Specialty Insurance Company
  • Endurance American Insurance Company
  • Endurance Risk Solutions Assurance Co.
  • American Agri-Business Insurance Company

The following Long-Term IR has been assigned with a stable outlook for Endurance
Specialty Holdings Ltd.
:

— “bbb” on $230 million 6.35% Series C non-cumulative preferred shares

The following Long-Term IRs have been affirmed with a stable outlook for Endurance
Specialty Holdings Ltd.
:

— “a-” on $335 million 7% senior unsecured notes, due 2034

— “a-” on $300 million 4.7% senior unsecured notes, due 2022
(unconditionally assumed from Montpelier Re Holdings Ltd.)

Ratings are communicated to rated entities prior to publication.
Unless stated otherwise, the ratings were not amended subsequent to that
communication.

This press release relates to Credit Ratings that have been published
on A.M. Best’s website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please see A.M. Best’s
Recent
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Understanding
Best’s Credit Ratings
. For information on the proper media
use of Best’s Credit Ratings and A.M. Best press releases, please view
Guide
for Media – Proper Use of Best’s Credit Ratings and A.M. Best Rating
Action Press Releases
.

A.M. Best is the world’s oldest and most authoritative insurance
rating and information source. For more information, visit
www.ambest.com.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its
subsidiaries. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Seewon Oh, +852 2827 3404
Associate
Director, Analytics

[email protected]
or
Edin
Imsirovic, +1 908 439 2200, ext. 5740

Senior Financial
Analyst

[email protected]
or
Victoria
Ohorodnyk, +1 908 439 2200, ext. 5326

Financial Analyst
[email protected]
or
Christopher
Sharkey, +1 908 439 2200, ext. 5159

Manager, Public Relations
[email protected]
or
Jim
Peavy, +1 908 439 2200, ext. 5644

Director, Public Relations
[email protected]

 


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