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March 20 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Japan-based Mitsui Sumitomo Insurance Company, Limited's
(MSI) Insurer Financial Strength (IFS) Rating and its Long-Term Issuer Default
Rating (IDR) at 'A+'. The Outlook is Stable. Fitch has also affirmed the company's USD1.3bn 7%
subordinated notes due 15 March 2072 at 'A-'.
MSI is a core company of MS&AD Insurance Group (MS&AD Group), along with Aioi
Nissay Dowa Insurance Co., Ltd and Mitsui Sumitomo Aioi Life Insurance Company,
KEY RATING DRIVERS
The affirmation reflects the on-going recovery in MSI's domestic non-life
business, MS&AD Group's strong business position and adequate capitalisation,
and MSI's low leverage. These strengths are offset by its large investment
exposure to domestic equities as well as significant catastrophe exposures,
which are the source of volatility in operating performance and capital
MSI's combined ratio (excluding compulsory auto liability insurance and
residential earthquake insurance) improved in the first half of the financial
year ending March 2014 (FY14) to 93.7% from 103.0% a year earlier, underpinned
by premium growth in its core automobile business lines and lower catastrophe
Fitch expects MSI and MS&AD Group to maintain adequate capital buffers through a
reduction of investment risks. The group's consolidated solvency margin ratio
(SMR) was 767.1% at end-September 2013, slightly better than 738.8% at FYE13 due
to an increase in unrealised gain on securities. MS&AD Group has been reducing
its exposures to domestic equities on a book value basis, but equities still
accounted for 21% of the group's total invested assets at end-September 2013.
An upgrade is unlikely in the near term as MSI's ratings are at Japan's
Local-Currency IDR of 'A+', which is on Negative Outlook.
Key rating triggers for a downgrade include significant deterioration in
capital, specifically a decline in MS&AD Group's consolidated SMR to below 500%
or in Fitch's internal capitalisation measures on a sustained basis. In
addition, the ratings may come under pressure should MSI's financial leverage
rise above 28% (14.2% at the end-September 2013).