22-D-0223
June 24, 2022

JCR's Rating Review of Major Non-Life Insurance Groups
JCR has reviewed the ratings for the core companies and insurance holding companies of Japan’s major
non-life insurance groups (Tokio Marine Group, Sompo Holdings Group and MS&AD Insurance Group)and provides its rating viewpoints below. Please refer to JCR’s press releases 22-D-0224 through 22-D0226 dated today for rating rational for individual companies.

Rating Viewpoints(1) Having reviewed the ratings for major non-life insurance groups’ core companies and insuranceholding companies, JCR affirmed the ratings on all of these companies and retained the Stable
outlook. Although the fiscal year ended March 2022 (FY2021) saw not only the COVID crisis persist
but also business conditions change significantly, including trends in the financial market like theheightening of geopolitical risks toward the year-end, it ended favorably, as indicated by the muchhigher profit level of major non-life insurance groups than before. The occurrence of natural disasters
in Japan that drastically affect the earnings was at a low level for two years in a row. As regards theprofitability of the fire insurance business, which has been issue to be addressed, earnings
improvement measures, such as the constant revision of rates and products and the adoption of astricter underwriting policy, are gradually yielding positive results. For the automobile insurance
business, good profitability is maintained, reflecting a decrease in accidents, etc. In the overseas
business, the profit level has risen thanks to the elimination of the impact of insurance claims
payments in FY2020 because of the COVID crisis, as well as to other factors like the realization ofrate increases on the back of the hard market.
(2) JCR assumes the impact of the Russia-Ukraine situation to be limited for now. While major non-life
insurance groups who operate globally have certain levels of underwriting of property, trade credit,
marine, aircraft and other insurance in the region, the size of such underwriting is small relative to theentire group portfolio. In addition, war risks are basically an immunity, and JCR views that, even forsome insurance that covers such risks, risks are adequately controlled through, for instance,reinsurance schemes.
(3) For domestic natural disasters excluding earthquakes, a certain amount of insurance money was paid
in FY2020 and FY2021 due to heavy rains and snows but was much below the historically high levels
recorded in FY2018 and FY2019, thus remaining low for two years in a row. Overseas, on the otherhand, there still is a tendency of frequent occurrence of large-scale natural disasters such as
hurricanes and cold waves in North America and floods in Europe, and the hard market continues.
Even though major non-life insurance groups have been able to stabilize their earnings in a mutuallycomplementary manner with their business portfolios that are well-diversified into domestic andoverseas operations, they cannot escape the impact of natural disasters in Japan, where they aremainly based. Given that natural disasters of the scale said to be “once in several decades” havebeen occurring in a relatively short period of time, JCR considers that trends in the scale andfrequency of natural disasters, including the impact of climate change, need to be carefully monitored.
(4) Net premiums written in the domestic non-life insurance business have been on an upward trend
thanks to rate revisions for fire insurance, growth in new types of insurance, etc. The combined ratioof automobile insurance, which accounts for nearly half of the premiums, stays at a favorable levelas loss ratio is pushed down constantly and gradually by the spread of ASVs (advanced safetyvehicles) and further by a decrease in the number of accidents over the last two years because of
self-quarantine amid the COVID crisis. From a future perspective, the aging society with a declining
birthrate, population decline and the penetration of CASE (connected, autonomous, shared andelectric) technologies and the MaaS (Mobility as a Service) platform, along with other factors, areprojected to have some impact. Given the solid domestic automobile insurance market, JCR does
not expect the business environment to change drastically in a short period but will nevertheless keepa close eye on the spread of automated vehicles, the status of improvement in the businessenvironment and legal measures taken and so forth from a medium- to long-term perspective.
(5) For the fire insurance business, which tends to be affected by natural disasters and major accidents,
while it has been constantly in deficit as natural disasters have been occurring more frequently andwith greater intensity than before, there are signs of steady improvement in profitability thanks to thecontinuous efforts to improve earnings, including a sharp raise in rates, product revisions, restrictions
1/3
Copyright © Japan Credit Rating Agency, Ltd. All Rights Reserved.

on underwriting, adoption of a stricter underwriting policy and implementation of measures to preventand reduce disasters. That said, the pace of improvement is slow because of the long compensation
periods of the products, leaving room for improving the earnings structure. JCR will therefore continue
closely watching the outcomes of revenue improvement measures, such as the realization ofappropriate rates and product revisions in consideration of the risk-return balance.
(6) Major non-life insurance companies are striving to lower the combined ratio even further by increasing
business efficiency through digital transformation, etc. It will be several years before the effectivenessof such efforts can be realized, but the earnings capacity of the core insurance business is likely toincrease as a result; therefore, outcomes will be closely monitored. Moreover, packaged products
targeting SMEs and new types of insurance to capture such insurance needs as healthcare,renewable energies and cyber-related are showing sharp growth for the non-life insurance groups
alike. As new insurance needs have become evident with changes in consumer behavior and risk
recognition amid the COVID crisis, they may provide new business opportunities for non-life
insurance companies.
(7) Major non-life insurance groups have been building a diversified business portfolio in terms of risk
categories and geographical areas. As a result, they have been curbing fluctuations in profits andensuring a certain consolidated net income by mutually complementing businesses by, for instance,covering downward pressure on domestic operations with the overseas business. They all engage inthe life insurance business through subsidiaries and focus on the sale of relatively profitable
protection-type products through diverse channels including non-life insurance agents, financial
institutions and walk-in insurance shops. Moreover, they take proactive stance in the overseas
business so as to secure growth opportunities and diversify risks, and thus their appetite for strategic
investment is rather strong. While momentum for large-scale M&As appears to have become
somewhat smaller over the past few years because of market conditions and restrictions on valuation,
JCR predicts that bolt-on M&A deals that are small in scale and easier to envision synergies withexisting businesses will increase. While the business environment on a global scale is uncertain
because of heightening geopolitical risks, changes in the financial market, etc., JCR considers thatfactors like the realization of group synergies are the keys to the rating decisions and is thus keeping
an eye on actual results.
(8) JCR is looking at the business and financial bases, risk management system, etc. in light of businesscharacteristics when rating non-life insurance companies including major non-life insurance groups
but considers that the weight of assessment on capital adequacy is largest from the quantitativeaspect. The creditworthiness of major non-life insurance groups is extremely high, which is equivalent
to the rating of AAA or AA+. While non-life insurance groups have been steadily accumulating retained
earnings, they have been proactively reducing price fluctuation risk associated with crossshareholdings, controlling interest rate risk in the life insurance business, managing insurance
underwriting risk by utilizing reinsurance and so forth. JCR believes that their ESR as an indicator of
economic-value based soundness, let alone solvency margin ratio under the current regulations, isgood enough to be commensurate with the group’s creditworthiness.
(9) JCR finds the ERM system of major non-life insurance groups to be highly mature. Major non-life
insurance groups have built an integrated management system for earnings and capital based on theconcept of risks through the establishment of ERM and have been taking measures to closely connect
ERM and management, including linking their business plans based on risk appetite to capital policy
and the utilization of economic value-based evaluation for setting earnings indicators, etc. While
incorporating ERM into the rating in consideration of the qualitative aspect, JCR positively views thatmajor non-life insurance groups are taking agile and appropriate measures even when the businessenvironment is changing drastically in a short period. These groups are all designated as IAIGs(internationally active insurance groups), and the significance of global and group-wide ERM isincreasing because of factors like the recent expansion of the overseas business. That said, JCR has
confirmed that non-life insurance groups are taking considerable care to ensure that decision-making
and awareness sharing of issues are not bottlenecked even in this era of the COVID crisis whencooperating with group companies including those overseas.
Tomohiro Miyao, Seito Achiha

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

<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 Japan Insurance Inc.
Long-term Issuer Rating: AA+Outlook: StableIssuer: 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

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.