The Best’s Briefing, titled, “Improved Operating Results for Japanese Non-Life Insurers Support Increased Level of Financial Leverage,” states that the three major non-life insurance groups — MS&AD Insurance Group Holdings, Inc., Sompo Holdings, and Tokio Marine Holdings — saw their profitability improve over the nine months ending December 2016, mainly due to the absence of large-scale catastrophe losses in the domestic market. In addition, improved underwriting results and growing contributions from overseas insurance businesses offset the decrease in interest and dividend incomes. These major non-life insurance groups have reported premium income and earnings growth from their overseas businesses and the consolidations of recently acquired operations.

In recent years, Japan’s non-life insurance groups have made large-scale acquisitions in overseas markets, which have boosted their earnings. Although risk-adjusted capitalization levels have been negatively affected by the large amount of goodwill from these acquisitions, the non-life insurance groups still maintain strong levels of risk-adjusted capitalization as a result of reduced investment risk and the issuance of subordinated debt. The groups also have become more active in issuing debt in recent years, taking advantage of the low interest rate environment.

A.M. Best expects Japan’s non-life insurance groups to remain active in the debt market to support the growth and manage the risks of the group companies. Their diversified businesses should provide stable operating results, which will support sufficient interest coverage.

To access a copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=259052.

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