24-D-0443
July 12, 2024

JCR's Rating Review of Major Non-Life Insurance Groups
JCR has reviewed the ratings of major non-life insurance groups in Japan. The rating viewpoints in thisreview are as follows. Please refer to JCR’s press releases (24-D-0444, 24-D-0445, and 24-D-0446)
dated today for rating rational for individual companies.

Rating Viewpoints(1) JCR has reviewed the ratings of the insurance holding companies and core companies of the major
non-life insurance groups, and has affirmed all of their ratings with "Stable" outlook. Although thebusiness environment was quite stressful, both adjusted profit and net income of each groupincreased significantly year-on-year in the fiscal year ended March 2024 (FY2023), reaching record
highs. However, while overseas business, which performed well due to premium rate hikes and otherfactors, drove performance, and foreign exchange factors and gains from the sale of strategically held
shares boosted profit levels, domestic non-life insurance business (excluding investment income)was flat or declined year-on-year. In addition to the high claims paid for natural disasters, which
continued from the previous year, profits of automobile insurance deteriorated due to the rising unit
cost of repair expenses. Although each company has been subject to administrative action forpremium adjustments in the corporate insurance field, the impact on their customer base and financialbase has been limited.
(2) Although the impact of natural disasters cannot be avoided due to the nature of the business, eachgroup has been able to stabilize profit level by diversifying business portfolio both in Japan andoverseas in a mutually complementary manner. In Japan, typhoons, torrential rains, hailstorm
disasters, and snow disasters occur frequently, and overseas, natural disasters of relatively large
scale have also occurred. JCR believes that the scale and frequency of natural disasters, including
impact of climate change, should be closely monitored. Fire insurance is susceptible to the impact ofnatural disasters and major accidents, and has been constantly in the red. However, measures toimprove profits, including premium rate hikes, product revisions, restriction on underwriting andstricter underwriting, are steadily showing results. However, there is still room for improvement inprofit structure, and continuing efforts to improve profit based on the balance of risk and return will beimportant.
(3) Combined ratio of automobile insurance, which accounts for almost half of premiums written, hasbeen on an upward trend. The number of accidents has increased with the recovery of traffic volume
after the end of COVID-19 pandemic, and inflation has pushed up the unit cost of repair expenses,
including labor costs. While JCR believes that this can be covered in the medium term throughpremium rate revisions and other measures, the impact of natural disasters, such as hailstorms,
cannot be ignored. In the automobile insurance market, in addition to the impact of the declining
birthrate and aging population, the market is expected to be affected by the progress of automateddriving technology. JCR does not consider that the domestic market environment will change
significantly in a short period of time, but will continue to monitor the spread of self-driving cars,
environmental improvements, and legislative measures from a medium- to long-term perspective,
based on the movement of approval of "Level 4" self-driving cars.
(4) The major non-life insurers are increasing new types of insurance that capture insurance needs suchas packaged products for SMEs, healthcare, renewable energy, and other GX-related and cyber risks,
and JCR believes there is room for continued expansion, given the insurance penetration rate relative
to the market size. In addition, companies are working to further lower their expense ratios byreducing workloads and improving business efficiency through the promotion of DX, digital
investments, and use of AI. The specific details of these measures are diverse, and it is expected totake time for the effects to emerge, but JCR will keep a close eye on the results, such as reductions
in workloads.
(5) Major non-life insurance groups have been building a diversified business portfolio in terms of typesof risks and geographic locations. As a result, non-life insurance and life insurance businesses, aswell as domestic and overseas businesses, complement each other, thereby limiting fluctuations inprofit and ensuring stable consolidated net income for the group. The life insurance business ishandled by group companies, which distribute their products through a variety of sales channels,
including non-life insurance agents, financial institutions, and independent insurance agents. The
1/3
Copyright © Japan Credit Rating Agency, Ltd. All Rights Reserved.

domestic interest rate environment has reached a turning point, and an increase in flexibility in productdesign can be expected in the future. In addition, major non-life insurance groups are taking anaggressive stance on overseas business in order to secure growth opportunities and diversify risks,
and there is a strong appetite for strategic investments. In recent years, while they have been cautious
about large-scale M&A due to high valuations, there has been an increase in bolt-on acquisitions thatare smaller in scale and can easily be expected to generate synergies with existing businesses.
(6) ESR of major non-life insurance groups is at a level that allows them to maintain soundness evenunder considerable stress. Each group has set a target range and is implementing a disciplined
capital policy, while reducing price volatility risk by selling strategically held shares, controlling interest
rate risk in the life insurance business, and managing underwriting risk through the use of reinsurance.
The maturity of ERM systems in the major non-life insurance groups is high, and ERM is closely
linked to management, such as collaboration with business planning and capital policies based onrisk appetite, and using economic value-based assessments in setting earnings indicators. Eachgroup is designated as IAIGs, and the importance of global and group-wide ERM is increasing withthe expansion of overseas business and other developments. JCR highly evaluates the flexible andappropriate response even in a business environment undergoing significant changes in a shortperiod of time.
(7) In December 2023, major non-life insurance companies received a business improvement order from
Financial Services Agency (FSA) for premium adjustments in the coinsurance for corporate
customers. This case is considered to violate the "Prohibition of unreasonable restraint of trade(Cartel)" under the Antimonopoly Act, and Fair Trade Commission has conducted on-site inspectionsof the companies. This incident indicates that there were problems in the governance systems ofeach company and in the awareness of compliance in their sales departments, and each company
has formulated a business improvement plan and is taking steps to fundamentally reform its corporate
culture. Although the decline in reputation could lead to damage to the customer base, thecoinsurance policies for corporations involved in this case are extremely small in terms of the overall
underwriting portfolio of each company, and JCR does not believe that this case alone has any impact
on the group's creditworthiness. JCR will monitor the progress and results of the various recurrence
prevention measures from the perspective of whether an effective compliance system can beestablished to prevent similar problems from occurring.
Tomohiro Miyao, Seito Achiha<Reference>Issuer: Tokio Marine Holdings, Inc.
Long-term Issuer Rating: AAA

Outlook: Stable

Issuer: Tokio Marine & Nichido Fire Insurance Co., Ltd.
Long-term Issuer Rating: AAA

Outlook: Stable

Issuer: Sompo Holdings, Inc.
Long-term Issuer Rating: AA+

Outlook: Stable

Issuer: Sompo Japan Insurance Inc.
Long-term Issuer Rating: AA+Outlook: Stable

Issuer: MS&AD Insurance Group Holdings, Inc.
Long-term Issuer Rating: AA+Outlook: StableIssuer: Mitsui Sumitomo Insurance Company, Limited
Long-term Issuer Rating: AA+Outlook: StableIssuer: Aioi Nissay Dowa Insurance Company, Limited
Long-term Issuer Rating: AA+Outlook: Stable

2/3
Copyright © Japan Credit Rating Agency, Ltd. All Rights Reserved.

Japan Credit Rating Agency, Ltd.
Jiji Press Building, 5-15-8 Ginza, Chuo-ku, Tokyo 104-0061, Japan
Tel. +81 3 3544 7013, Fax. +81 3 3544 7026
Information herein has been obtained by JCR from the issuers and other sources believed to be accurate and reliable. However, because of the possibility of human or mechanical error as well as other factors,
JCR makes no representation or warranty, express or implied, as to accuracy, results, adequacy, timeliness, completeness or merchantability, or fitness for any particular purpose, with respect to any suchinformation, and is not responsible for any errors or omissions, or for results obtained from the use of such information. Under no circumstances will JCR be liable for any special, indirect, incidental orconsequential damages of any kind caused by the use of any such information, including but not limited to, lost opportunity or lost money, whether in contract, tort, strict liability or otherwise, and whether
such damages are foreseeable or unforeseeable. JCR's ratings and credit assessments are statements of JCR's current and comprehensive opinion regarding redemption possibility, etc. of financial obligations
assumed by the issuers or financial products, and not statements of opinion regarding any risk other than credit risk, such as market liquidity risk or price fluctuation risk. JCR's ratings and credit assessments
are statements of opinion, and not statements of fact as to credit risk decisions or recommendations regarding decisions to purchase, sell or hold any securities such as individual bonds or commercial paper.
The ratings and credit assessments may be changed, suspended or withdrawn as a result of changes in or unavailability of information as well as other factors. JCR receives a rating fee paid by issuers for
conducting rating services in principle. JCR retains all rights pertaining to this document, including JCR's rating data. Any reproduction, adaptation, alteration, etc. of this document, including such rating
data, is prohibited, whether or not wholly or partly, without prior consent of JCR.
JCR is registered as a "Nationally Recognized Statistical Rating Organization" with the U.S. Securities and Exchange Commission with respect to the following four classes. (1) Financial institutions, brokers
and dealers, (2) Insurance Companies, (3) Corporate Issuers, (4) Issuers of government securities, municipal securities and foreign government securities.
JCR publishes its press releases regarding the rating actions both in Japanese and in English on the same day. In case that it takes time to translate rating rationale, JCR may publicize the summary version,
which will be replaced by the full translated version within three business days. (Regarding Structured Finance products, JCR only publicize the summary version in English.)

3/3
Copyright © Japan Credit Rating Agency, Ltd. All Rights Reserved.