A.M. Best downgrades Credit Ratings of Tokio Millennium Re AG; places under review with developing implications

6 November 2018 —
A.M. Best has downgraded the Financial Strength Rating to A+ (Superior) from A++ (Superior) and the Long-Term Issuer Credit Rating to "aa-" from "aa+" of Tokio Millennium Re AG (TMR) (Switzerland).

In addition, A.M. Best has placed these Credit Ratings (ratings) under review with developing implications.

The rating actions follow the recent announcement that RenaissanceRe Holdings Ltd (RenRe) (Bermuda) has entered into a definitive agreement with Tokio Marine Holdings, Inc. (Tokio Marine) under which it will acquire Tokio Marine's reinsurance platforms, which include TMR and Tokio Millennium Re (UK) Limited. If closing tangible book value is unchanged from June 30, 2018, Tokio Marine would receive USD 1.469 billion in a combination of cash and stock. The agreement has been approved by each side's board of directors and the transaction, subject to customary closing conditions and regulatory approval, is expected to close in the first half of 2019.

The ratings have been downgraded as A.M. Best believes that TMR is no longer strategic to the Tokio Marine group, although the parental guarantee and net worth maintenance agreement will remain in place until the closing of the transaction. Additionally, the downgrades align TMR's ratings with those of RenRe.

TMR's ratings will remain under review pending the completion of the transaction and until A.M. Best conducts discussions with the new parent regarding its plans for future support for this company. A.M. Best will continue discussions with TMR's management and monitor the company's risk-adjusted capitalization, operating performance and business profile.