Dec 21 -
-- Tokio Marine Group has announced that it will acquire Delphi, a
U.S.-based insurance group, for US$2.664 billion.
-- The impact of the planned transaction on Tokio Marine Group's
financial base would likely be within the assumptions we have made in our
ratings on the group's core operating companies.
-- We have affirmed the ratings on Tokio Marine Group's core entities.
The outlooks on the ratings are negative.
Standard & Poor's Ratings Services today affirmed its ratings on Tokio Marine & Nichido Fire
Insurance Co. Ltd. (AA-/Negative/A-1+) and Tokio Marine & Nichido Life Insurance Co. Ltd.
(AA-/Negative/--), which are the core entitites of Tokio Marine Group. Our rating affirmations
follow the group's announcement that it plans to acquire U.S.-based Delphi Financial Group Inc.
(BBB/Stable/--). At the same time, Standard & Poor's also affirmed its ratings on the overseas
branches of Tokio Marine & Nichido Fire, as well as the group's overseas insurance subsidiaries
that have been given unconditional guarantees of policy obligations by Tokio Marine & Nichido
Fire (see list below). The outlooks on all the aforementioned ratings are negative.
Tokio Marine Group announced that its holding company, Tokio Marine Holdings
Inc. (NR), has reached an agreement with Delphi to acquire the U.S.-based
insurance group through Tokio Marine & Nichido Fire for US$2.664 billion. The
acquisition will be funded by cash at hand and external debt. Given Tokio
Marine Group's overall financial base and the credit quality of the target
company, Standard & Poor's believes the impact of the acquisition on the
credit profile of Tokio Marine Group's core operating companies will be
Dim prospects for growth in Japan's non-life insurance market have prompted
Tokio Marine Group to enhance its overseas and life insurance businesses to
achieve business growth and boost group profits. As part of its medium- to
long-term strategy, the group has been pursuing an expansion strategy in
emerging markets, the U.S., and Europe. The planned acquisition of Delphi is
consistent with this strategy. If completed, the acquisition will be the
group's second-largest transaction following its acquisition of U.S.-based
Philadelphia Indemnity Insurance Co. (A+/Negative/--) and its sister company,
Philadelphia Insurance Co. (A+/Negative/--), in December 2008. Delphi is an
insurance group that owns Reliance Standard Life Insurance Co. (A/Stable/--),
First Reliance Standard Life Insurance Co. (A/Stable/--), and Safety National
Casualty Corp. (A/Stable/--). These insurers focus on niche business lines in
the U.S. market. They have achieved high growth and strong revenues, supported
by solid distribution relationships and strong competitive positions in their
markets. We see little overlap in Tokio Marine Group's and Delphi's
businesses. Standard & Poor's expects the acquisition to further diversify
Tokio Marine Group's earnings, and thereby underpin the group's very strong