The domestic non-life business of Japan's biggest general insurance company, Tokio Marine & Nichido Fire Insurance (TMNF), is expected to benefit from ongoing rate hike initiatives in key business lines, says AM Best.
TMNF’s international business continued to demonstrate notable improvements across various regions in fiscal-year 2023 ( year ended 31 March 2024). Its North American operations sustained strong momentum with double-digit profit growth in local currency terms, driven by proactive underwriting initiatives and favourable premium rate developments, coupled with strong investment results.
Ratings affirmed
AM Best has affirmed the Financial Strength Rating (FSR) of ‘A++’ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of ‘aa+’ (Superior) of TMNF and its subsidiaries. The outlook of these credit ratings is ‘Stable’.
The ratings reflect TMNF’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, very favourable business profile, and very strong enterprise risk management (ERM).
Balance sheet strength
TMNF’s balance sheet strength assessment reflects its risk-adjusted capitalisation that is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). This assessment is further supported by the company’s highly conservative financial leverage and high-quality capital.
Despite potential exposure to considerable equity risk from its substantial domestic stock investments, TMNF maintains a robust capital base capable of absorbing such risks. AM Best also expects that the company’s plan to accelerate the disposal of strategic equity holdings could potentially reduce its overall equity risk exposure in the coming years.
TMNF has a commendable track record of consistent premium growth, supported by its diversified business portfolios, with its net premium written (NPW) rising from JPY3.4tn ($24bn) to JPY4.6tn over the last five years (fiscal year 2019 – 2023). The company has also delivered a solid five-year average return on equity of 7.4% (fiscal 2019 – 2023) on a consolidated basis, as calculated by AM Best.
Despite some volatility in net profit stemming from natural catastrophe events in Japan, TMNF has maintained a consistently profitable underwriting performance in its domestic non-life business over the same period.
Business profile
TMNF continues to maintain a diversified business profile with global operations spanning different markets and lines of business. In Japan, it holds a strong market position across all non-life segments, commanding a market share of over 25% in terms of NPW. Over the last decade, TMNF has strategically expanded its global footprint through disciplined merger and acquisition strategies to establish a portfolio of high-quality overseas insurance business, which now represents approximately 47% of its NPW. AM Best believes that TMNF’s leading position in the domestic market and sizeable international business portfolio will continue to provide a strategic advantage, enabling it to navigate challenging market positions and enhance earnings over the medium to long term.
The company maintains a sophisticated ERM framework that is embedded throughout its organisation. AM Best believes that TMNF’s risk management capabilities align closely with the company’s highly complex and diverse risk exposures.
Subsidiaries
The FSR of ‘A++’ (Superior) and the Long-Term ICRs of ‘aa+’ (Superior), have been affirmed with ‘Stable’ outlooks for the following subsidiaries of TMNF:
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Tokio Marine America Insurance Company
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Trans Pacific Insurance Company
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TM Specialty Insurance Company
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TNUS Insurance Company