Fitch has affirmed Tokio Marine’s rating at 'AA-' with a negative outlook, prompted by continuing concerns over Japan’s creditworthiness.
Fitch expects Tokio’s Insurance Financial Strength rating to remain on a negative outlook over the foreseeable future due to more than 80% of the company’s revenues and assets being held in the country.
However, the agency acknowledges that the group demonstrates strong levels of capital, liquidity, and franchise.
In addition, Fitch points to Tokio’s growing international businesses, which already represents about a third to half of its total adjusted earnings.
Should there be a downgrade in Japan's sovereign rating, the agency expects to maintain some flexibility as to whether Tokio’s rating could be higher than the sovereign.
This could, in part, be based on the group's further global diversification and or a further improvement of its domestic insurance businesses and de-risking in investment management.
Fitch notes Tokio Marine Group's solid capitalisation and overall robust insurance underwriting fundamentals for both non-life and life, which are diversified globally. And it says the Japanese insurance giant has further reduced its exposure to high-risk domestic equity by 187bn yen for the financial year ended March 2011.
“Such de-risking and the group's robust underwriting fundamentals have supported capitalisation in the face of Japan's earthquake and tsunami in March. Its profitable domestic life insurance and international insurance continue to grow steadily, while losses at its domestic non-life insurance business are expected to bottom out soon mainly due to continuous premium rate hikes in motor insurance.”
Yesterday, Tokio Marine Europe Insurance Limited filed for Chapter 15 protection from creditors in a New York bankruptcy court for a book of run-off reinsurance.
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