Best Affirms Mitsui Sumitomo ‘A+’ Rating

A.M. Best Co. announced that it has affirmed the “A+” (Superior) financial strength rating of Japan’s Mitsui Sumitomo Insurance Company Ltd. with a stable outlook.

“The rating reflects Mitsui Sumitomo’s superior capitalization, strong market presence and stable operating performance,” said Best. It “also recognizes the company’s excellent underwriting performance and strong distribution capabilities.

“The company maintained superior capitalization throughout the depressed market. Under the Japanese solvency margin ratio, the company’s ratio stood at 1015.6 percent as of September 2003. The company is gradually shifting its non-fixed income investments into fixed income securities to further improve risk-adjusted capitalization. Capitalization is further strengthened by the company’s extensive and sophisticated reinsurance program. “

Best’s bulletin noted that the “merger of Mitsui Marine & Fire Insurance Company and Sumitomo Marine & Fire Insurance Company has been successfully completed, with improved operational efficiency, enhanced distributional capabilities and economies of scale. The company has progressed to its second medium-term strategy, MS WAVE II. Early results show a revenue increase during the first nine months of fiscal year 2003 at the same time as competitors experienced a decline. Whether the company can translate the increased revenue into increased profits remains to be seen.”

Best indicated that Mitsui Sumitomo’s “high exposure to weak financial markets, high exposure to equity markets and intensifying competition in underwriting business,” should be considered as “partially offsetting factors.”

Best observed that “Mitsui Sumitomo still held 29.5 percent of total assets in equities as of September 2003. The company has aggressively reduced its stock portfolio during the last two years, and its loan exposure to the financial sector is also considered high. Despite signs of economic recovery in Japan, A.M. Best does not expect immediate improvement in private consumption and deflation curbing.”