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 limited.
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 business profile.