A.M. Best Affirms Ratings of Aioi Nissay Dowa Insurance (China) Company Limited
by admin on Nov.30, 2011, under Car insurance
HONG KONG, Nov 28, 2011 (BUSINESS WIRE) — A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Aioi Nissay Dowa Insurance (China) Company Limited (ADIC) (China). The outlook for both ratings is stable.
The rating affirmations reflect ADIC’s solid risk-adjusted capitalization and improved operating performance. The ratings also consider the continued parental support from Aioi Nissay Dowa Insurance Company Limited in the areas of business development, operations and reinsurance.
ADIC’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains strong and supportive of the company’s current ratings. ADIC is well capitalized to support the projected business growth and the expenditures associated with its future branch expansion across China over the coming three years. Net premium leverage stood at 0.2 times in 2010 and is expected to reach 0.6 times by 2013.
ADIC recorded a marginal profit of CNY 0.6 million for 2010, compared to an after-tax net loss of CNY 12.8 million for 2009, mainly due to a narrowed underwriting loss and a government subsidy received during the year. The company’s underwriting loss decreased to CNY 3.3 million for 2010, from a loss of CNY 16.9 million for 2009, primarily due to the release of reserves under favorable loss development on prior-year claims. Its ultimate loss ratio for prior-year claims was lower than that of the industry average, which ADIC was using as the reserving benchmark in view of its limited claims experience. While the loss ratio is expected to be maintained at a stable level over the next three years, A.M. Best believes expense control will be the key for ADIC to improve its underwriting profitability, in addition to maintaining a disciplined underwriting practice in the mid to long term.
Under the support of its parent company, ADIC commenced a co-insurance arrangement on individual motor insurance with Ping An Insurance within ADIC’s licensed regions in 2010. ADIC is expected to leverage on the strong relationship between its parent company and Toyota Motor Corporation to build up its motor portfolio going forward.
Partially offsetting these positive rating factors are ADIC’s high expense ratio during its early stages of operation and the implementation risk of its business plan.
ADIC’s operating cost is expected to accelerate over the next three years, in view of the start-up cost incurred for its planned branch expansion. Given the continuing competitive market conditions, any adverse deviation from its business plan could prolong the company’s targeted break-even period. Nevertheless, the projected business growth to be generated through the opening of new branches should partially alleviate the high expense ratio over the long term.
The principal methodology used in determining these ratings is Best’s Credit Rating Methodology — Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Understanding BCAR for Property/Casualty Insurers”; “Understanding Universal BCAR”; “Risk Management and the Rating Process for Insurance Companies”; “Catastrophe Analysis in A.M. Best Ratings”; “Assessing Country Risk”; and “Rating Members of Insurance Groups.” Methodologies can be found at www.ambest.com/ratings/methodology .
Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com .
Copyright (C) 2011 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
SOURCE: A.M. Best Co.
A.M. Best Co. Vivian Cheung Financial Analyst +852-2827-3411 vivian.cheung@ambest.com or Moungmo Lee General Manager +852-2827-3402 moungmo.lee@ambest.com or Rachelle Morrow Senior Manager, Public Relations +(1) 908 439 2200, ext. 5378 rachelle.morrow@ambest.com or Jim Peavy Assistant Vice President, Public Relations +(1) 908 439 2200, ext. 5644 james.peavy@ambest.com
Source:
