HONG KONG--(BUSINESS WIRE)--
A.M. Best has revised the outlook to negative from stable and affirmed
the financial strength rating of A- (Excellent) and the issuer credit
rating of ďa-Ē of Aioi Nissay Dowa Insurance (China) Company Limited(ADIC)(China).
The ratings reflect ADICís conservative and highly liquid investment
portfolio and continued support from its parent company, Aioi Nissay
Dowa Insurance Company Limited(ADI), in the areas of business
development, capitalization, operations and reinsurance. The revised
outlook reflects the expected material deterioration of the companyís
risk adjusted capitalization due to the anticipated rapid business
growth, in conjunction with the decline in capital and surplus over the
ADIC reported underwriting losses from the SK Hynix fire accident in
China in 2013. The size of the retained loss had reached the companyís
maximum level of per event retention, which, as a result, had adversely
impacted the companyís operating performance and capitalization.
Moreover, ADICís risk-adjusted capitalization, as measured by Bestís
Capital Adequacy Ratio, is expected to materially deteriorate over the
next two to three years in view of the high premium growth arising from
the roll-out of its motor reinsurance business starting 2013. The
business plan is expected to substantially increase its underwriting
risk relative to its projected capital and surplus position. However,
the companyís management is expected to receive financial support from
its parent company ADI, to support its risk-adjusted capitalization in
the medium term.
The outlook may be revised back to stable if ADIC receives significant
financial support to restore its risk-adjusted capitalization to an
adequate level to support its business plan and demonstrates an ability
to generate sustainable operating profit.
Negative rating actions could arise if the company fails to maintain its
risk-adjusted capitalization at an adequate level to support its current
ratings over the next two years.
The methodology used in determining these interactive ratings is Bestís
Credit Rating Methodology, which provides a
comprehensive explanation of A.M. Bestís rating process and contains the
different rating criteria employed in the rating process. Bestís Credit
Rating Methodology can be found at www.ambest.com/ratings/methodology.
Ratings are communicated to rated entities prior to publication, and
unless stated otherwise, the ratings were not amended subsequent to that
This rating announcement has been issued by A.M. Best Asia-Pacific
Limited, which is a subsidiary of A.M. Best Company. 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 © 2014 by A.M. Best Company, Inc.ALL RIGHTS
A.M. Best Company, Inc.
Vivian Cheung, +852-2827-3411
General Manager, Analytics
Peavy, +(1) 908-439-2200, ext. 5644
Assistant Vice President,
Source: A.M. Best Company, Inc.