Outlook stable following $4.7bn acquisition of Philadelphia Consolidated.
Fitch has affirmed Tokio Marine & Nichido Fire Insurance's (TMNF) Insurer Financial Strength (IFS) rating at 'AA+', following its acquisition of the 50th largest insurer in the US, Philadelphia Consolidated.
In a statement Fitch said the insurer's outlook remained Stable.
The acquisition price of $4.7bn, is to be financed by Tokio Marine's cash on hand and borrowings, including bond issuance. For the repayment of the bonds, the group intends to use proceeds from the sale of stocks held by TMNF. Philadelphisa is 19th most profitable insurer in the US, and the fourth in terms of return on equity, according to the Financial Times.
Tokio Marine's strategy, the company said, is to enhance its overseas operations, from which the group can expect higher profit growth than in the Japanese insurance market, as well as to geographically diversify its business portfolio. This includes the acquisition of Lloyd's insurer, Kiln, and its subsidiaries earlier this year for £442m.
Fitch said: "TMNF's capital position will remain strong following the acquisition, at a level commensurate with its 'AA+' IFS rating, although the group's leverage may increase with new borrowings and a sizeable element of goodwill will be recorded.
"Fitch notes that Philadelphia Consolidated's capitalisation is strong and its underwriting operations have been profitable. The acquisition is likely to enhance the Tokio Marine Group's profitability and its future growth prospects, if risks are managed properly."
