Fitch Ratings has said that there will be “limited immediate impact” on ratings after Tokio Marine Holdings Inc. (Tokio Marine) announced it’s plans to buy Delphi Financial Group.
Japanese insurance giant Tokio Marine has agreed to pay JPY200 billion (GBP1.6 billion) in cash for Delphi Financial Group Inc., an American based insurance company.
The agency said there would be little effect on ratings because despite how big the deal may seem, it is small compared with Tokio Merine’s net assets of JPY1,806bn, shareholders’ equity of JPY1,238bn and cash and equivalent of JPY711bn.
The deal will be beneficial for Tokio Marine’s credit profile over the medium term because of Delphi’s strong market position in the US, Fitch said. Because Delphi specialises in areas with limited exposure to natural catastrophes, it will broaden Tokyo Marines risk profile and increase the groups overseas earnings.
Fitch was very confident about the merger, saying, “the acquisition should enhance Tokio Marine Group’s global diversification by increasing overseas adjusted earnings to about 46% of the group’s total, compared with the current 37%. Negative impact [for Tokio Marine] in terms of capital adequacy and leverage is likely to be limited.”
