A.M. Best Upgrades Issuer Credit Ratings of First of Hawaii Group and Its Members

A.M. Best Upgrades Issuer Credit Ratings of First of Hawaii Group and Its Members

A.M. Best Co. has upgraded the issuer credit ratings (ICR) to “a+” from “a” and affirmed the financial strength rating (FSR) of A (Excellent) of First of Hawaii Group (the group) (Honolulu, HI) and its members. The ratings have been removed from under review with positive implications and assigned a stable outlook. (See below for a detailed listing of the companies.)

These rating actions follow Tokio Marine Holdings, Inc. (TMHD) (Tokyo, Japan) having completed its acquisition of 50% of the outstanding shares of First Insurance Company of Hawaii, Ltd. (FICOH), which previously was owned by CNA Financial Corporation (headquartered in Chicago, IL) [NYSE: CNA], through its wholly owned subsidiary, Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF) (Tokyo, Japan). TMNF, which already owned 50% of the outstanding shares of FICOH prior to the acquisition, now owns 100% of its outstanding shares.

The Tokio Marine Group has been seeking expansion of its international insurance business to be a driving force for its mid- to long-term growth strategy through organic growth, as well as by means of mergers and acquisitions, to become a global top-tier insurer. In the U.S. market, TMHD acquired Philadelphia Insurance Companies in December 2008, and in May 2011, Tokio Marine North America, Inc. (TMNA) was established to manage all U.S. business entities of the Tokio Marine Group for further growth in the market. In addition, Shared Service Company (SSC) was established to provide certain back-office services to Tokio Marine Group entities in the United States.

The ratings reflect the group’s strong risk-adjusted capitalization, excellent overall earnings profile and sound localized market presence as a leading insurance provider in Hawaii. In addition, the ratings are enhanced by the financial flexibility of TMNF and the group’s strategic importance to Tokio Marine Group’s expansion in the United States. Somewhat offsetting these positive rating factors are the group’s concentration risk as a single state insurer, its potential exposure to catastrophe losses, slightly elevated common stock exposure and the current weak economic conditions and highly competitive environment in its marketplace.

The group will continue to operate locally in Hawaii and retain current management, with ultimate control at TMHD and direct ownership by TMNF. While some execution risks exist in integrating the group into Tokio Marine Group, it is now a member of a large, diversified, strongly capitalized and highly rated organization and should realize some economies of scale as a result of back-office functions provided by SSC, as well as potential explicit support provided by TMNF.

The ICRs have been upgraded to “a+” from “a” and the FSR of A (Excellent) has been affirmed for First of Hawaii Group and its following members.

• First Insurance Company of Hawaii, Ltd.
• First Fire and Casualty Insurance of Hawaii, Inc.
• First Indemnity Insurance of Hawaii, Inc.
• First Security Insurance of Hawaii, Inc.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Rating Members of Insurance Groups”; “Understanding BCAR for Property/Casualty Insurers”; “Catastrophe Analysis in A.M. Best Ratings”; “Natural Catastrophe Stress Test Methodology”; “The Treatment of Terrorism Risk in the Rating Evaluation”; and “Assessing Country Risk.” Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2011 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

A.M. Best Co.
W. Dolson Smith, CFA
Senior Financial Analyst
908-439-2200, ext. 5379
w.dolson.smith@ambest.com
or
Joseph Roethel
Assistant Vice President
908-439-2200, ext. 5630
joseph.roethel@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
908-439-2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
908-439-2200, ext. 5644
james.peavy@ambest.com