The financial and credit ratings of Mitsui Sumitomo Insurance Co. (MSI) remain unchanged following an announcement by its parent company, MS&AD Insurance Group Holdings (MS&AD), that it plans to reorganize its international businesses operating within MSI, said AM Best.

Under this reorganization, some of MSI’s overseas subsidiaries, such as MS Amlin plc and its subsidiaries, are expected to be treated as independent asset groups, said the ratings agency. Since the profitability of some of their businesses has fallen short of the original business plan made at the time of MSI’s acquisition, an impairment loss of 175.4 billion Japanese yen (approximately US$1.6 billion) was recognized for the second half of fiscal-year 2019, under extraordinary losses for assets such as goodwill and other intangible assets, AM Best said.

AM Best does not expect a material deterioration in MSI’s consolidated risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Although this was a significant increase in extraordinary losses, which in turn has placed some pressure on profit before tax, there also will be an approximate JPY 170 billion ($1.6 billion) decrease in the company’s income tax expense due to the reorganization during the second half of fiscal-year 2019, said AM Best.

AM Best said the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa” of Mitsui Sumitomo Insurance Co. Limited (MSI) remain unchanged and the outlood remains stable.

Concurrently, AM Best said the FSRs of A+ (Superior) and the Long-Term ICRs of “aa” of MSI’s U.S. operating companies remain unchanged. These are: Mitsui Sumitomo Insurance Co. of America, Mitsui Sumitomo Insurance USA Inc. and MSIG Specialty Insurance USA Inc. These companies are domiciled in New York, NY. The outlook of these ratings remains stable.

AM Best also commented that the FSRs of A (Excellent) and the Long-Term ICRs of “a+” of Zurich-based MS Amlin AG, and Lloyd’s Syndicate 2001, which is managed by MS Amlin Underwriting Ltd., are unchanged with a stable outlook.

“Syndicate 2001’s ratings reflect the financial strength of the Lloyd’s market; the Lloyd’s market rating is the floor for all syndicate ratings, reflecting the Lloyd’s chain of security, and, in particular, the role of the Central Fund, which partially mutualizes capital at the market level,” said AM Best, noting that the underwriting portfolio and business plans of MS Amlin AG are expected to remain materially the same.

Source: AM Best

*This story ran previously in our sister publication Insurance Journal.