Best’s Rating Report - Tokio Marine America · PDF filePrinted September 28, 2017 Page 1...

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TOKIO MARINE AMERICA INSURANCE COMPANY A++

TM SPECIALTY INSURANCE COMPANY A++

TNUS INSURANCE COMPANY A++

TRANS PACIFIC INSURANCE COMPANY A++

New York, New York

Best’s Rating Report

Ultimate Parent: Tokio Marine Holdings, Inc.

TOKIO MARINE AMERICA INSURANCE COMPANY1221 Avenue of the Americas, Suite 1500, New York, NY 10020-1001

Web: www.tmamerica.comTel: 212-297-6600 Fax: 212-297-6062AMB#: 012340 NAIC#: 10945Ultimate Parent#: 058633 FEIN#: 13-4032666

BEST’S CREDIT RATING

Best’s Financial Strength Rating: A++ Outlook: StableBest’s Financial Size Category: XV

RATING RATIONALE

Rating Rationale: The ratings of Tokio Marine & Nichido Fire Insurance Co.,Ltd. (TMNF), have been extended to Tokio Marine America InsuranceCompany (TMAIC) as it holds a strategic role within the organization as theprimary U.S. insurer that receives explicit support through internalreinsurance. The ratings also reflect the company’s strong risk-adjustedcapitalization and additional implicit support provided by the parent. Insuredsof TMAIC are clients of the parent that have operations in the United States.

The following text is derived from A.M. Best’s consolidated Credit Reporton Tokio Marine & Nichido Fire Insurance Co., Ltd. (AMB# 090909).

The ratings for Tokio Marine and Nichido Fire Insurance Company,Limited (TMNF), reflect its strong risk-adjusted capitalization, track record ofprofitable operating performance and favorable business profile.

TMNF’s strong risk-adjusted capitalization, as measured by Best’s CapitalAdequacy Ratio (BCAR), was supported by an increase in adjusted capitaland surplus. Operating performance remains very profitable, supported bystrong improvement in underwriting results, which partially offset a decline innet investment income.

TMNF is the main operating entity of Tokio Marine Holdings, Inc., in termsof premium income and net profit contribution. TMNF’s extensive andincreasing overseas presence, especially in developed markets, supports itsprofit generation and future growth. In addition, TMNF benefits fromgeographic and risk diversification.

Partially offsetting these positive rating factors are TMNF’s exposure tocatastrophe risks and its high proportion of equity investments, which couldbring volatility to its capital and surplus. However, the company activelymanages these risks in its enterprise risk management framework.

While positive rating actions are unlikely in the near term, negative ratingactions could occur if there is a material decline in TMNF’s risk-adjustedcapitalization due to either a consistent deterioration in the company’s

operating performance or a negative impact from large-scale catastropheevents.

FIVE-YEAR RATING HISTORY

DateBest’sFSR Date

Best’sFSR

08/18/17 A++ 08/22/14 A++08/19/16 A++ 05/15/14 A++08/21/15 A++ 08/22/13 A++

KEY FINANCIAL INDICATORS ($000)————————————Statutory Data————————————

PeriodEnding

DirectPremiumsWritten

NetPremiumsWritten

Pre-taxOperating

IncomeNet

Income

TotalAdmitted

Assets

Policy-holders’Surplus

2012 337,667 263,048 -1,325 7,942 1,388,704 499,0652013 386,036 275,020 15,939 16,038 1,383,526 514,3742014 393,386 247,956 15,614 25,364 1,349,244 497,3192015 416,365 308,477 16,066 17,819 1,360,546 510,5882016 424,538 302,692 -6,653 -44 1,444,631 539,301

——Profitability—— ———Leverage——— ——Liquidity——

PeriodEnding

Comb.Ratio

Inv.Yield(%)

Pre-taxROR(%)

NAInvLev

NPWto

PHSNetLev.

OverallLiq.(%)

Oper.Cash

flow (%)2012 116.1 3.8 -0.5 0.0 0.5 2.3 156.4 108.02013 109.2 3.7 6.2 0.0 0.5 2.2 159.6 96.72014 113.1 3.6 6.3 0.4 0.5 2.2 158.8 102.52015 109.6 3.3 5.4 0.1 0.6 2.3 160.4 103.02016 114.6 2.9 -2.2 1.9 0.6 2.2 160.3 113.3

5-Yr 112.4 3.5 2.9 … … … … …

(*) Within several financial tables of this report, this company is compared against theCommercial Casualty Composite.

(*) Data reflected within all tables of this report has been compiled from the company-filedstatutory statement.

BUSINESS PROFILE

Tokio Marine America Insurance Company (TMAIC) commencedoperations in September, 1999. The company is a New York domiciledproperty and casualty insurance company and is licensed in all fifty states, theDistrict of Columbia and Puerto Rico. The company primarily underwritescommercial lines products and select personal property and casualty coverage.The company is focused on reverse-flow business supporting Japan basedclients of the ultimate parent, Tokio Marine & Nichido Fire Insurance Co.,Ltd. (Japan) (TMNF). Roughly 70% of gross written premium is reverse-flowbusiness, with the balance domestic sourced business. Major lines includecommercial auto liability, ocean marine, fire, commercial multi-peril,workers’ compensation, other liability - occurrence, allied lines and auto



physical damage. A majority of premiums are written in California wheremost of TMNF clients do business in the United States, followed by Texas,New York, New Jersey, Florida and Illinois. Personal lines and smallcommercial business is distributed through a network of independent agentswhile medium to large accounts are placed through brokers.

TMAIC provides 100% quota share reinsurance to three affiliatedinsurance companies. Trans Pacific Insurance Company (TPI) writespreferred rate workers’ compensation, TM Specialty Insurance Company(TMS) provides excess and surplus lines coverages, and TNUS InsuranceCompany (TNUS) writes direct preferred rate workers’ compensation andcommercial multi-peril business. TPI, TMS, and TNUS are owned in theirentirety by TMAIC, and TMAIC is owned in its entirety by Tokio MarineNorth America, Inc. (TMNA), an insurance holding company domiciled in thestate of Delaware, which in turn is owned by TMNF. The ultimate parent isTokio Marine Holdings, Inc., a public company traded on the Tokyo StockExchange.


Tokio Marine & Nichido Fire Insurance Company, Ltd. (TMNF), is whollyowned by Tokio Marine Holdings, Inc., one of Japan’s largest insurancegroups. The group has more than 270 subsidiaries and affiliates that provideprimary life, non-life insurance and reinsurance as well as financial andgeneral types of business, including asset management, in the Japanese andoverseas markets. Established in 1879 as the first non-life insurance companyin Japan, TMNF has approximately one-quarter of the domestic market interms of net premiums written (NPW) at the end of December 2016.

TMNF is the group’s main operating subsidiary. Combining results fromdomestic non-life business and international business, TMNF generated 94%of the group’s NPW in fiscal year 2016. Moreover, TMNF is the group’sstrategic hub with regard to overseas market expansion. The production fromoverseas business has increased from about 5% to more than 35% of overallNPW during the past ten years. Overseas operating subsidiaries includePhiladelphia Consolidated Holding Corp., Delphi Financial Group Inc., andHCC Insurance Holdings, Inc., in North America; and Tokio Marine KilnGroup Limited and Tokio Millennium Re AG in Europe.

In the Japanese market, TMNF’s domestic non-life underwriting portfolio,in terms of NPW, consisted of voluntary automobile, which accounted forapproximately half of the portfolio, followed by compulsory auto liabilityinsurance (CALI), fire, personal accident and marine.

Fiscal year 2017 is the last year of Tokio Marine group’s mid-term businessplan, named “To Be a Good Company 2017.” The group is expected to reachits major targets set forth in this plan: an adjusted ROE in the upper 9% range;adjusted net income of around JPY 400 billion, compared to JPY 407 billion infiscal year 2016; and an enhanced dividend per share. Over the three-yearplan, business and risk diversification significantly improved due to theremarkable overseas expansion activities.

TOTAL PREMIUM COMPOSITION & GROWTH ANALYSIS

PeriodEnding

———DPW———Reinsurance

—Prem Assumed—Reinsurance

—Prem Ceded—($000) (% Chg) ($000) (% Chg) ($000) (% Chg)

2012 337,667 1.1 52,613 6.1 127,233 -8.92013 386,036 14.3 64,990 23.5 176,006 38.32014 393,386 1.9 68,422 5.3 213,852 21.52015 416,365 5.8 76,074 11.2 183,962 -14.02016 424,538 2.0 81,962 7.7 203,807 10.8

5-Yr CAGR … 4.9 … 10.6 … 7.8

PeriodEnding

————NPW———— ————NPE————($000) (% Chg) ($000) (% Chg)

2012 263,048 7.8 248,065 6.92013 275,020 4.6 257,468 3.82014 247,956 -9.8 249,178 -3.22015 308,477 24.4 295,447 18.62016 302,692 -1.9 301,667 2.1

5-Yr CAGR … 4.4 … 5.4

Territory: The company is licensed in the District of Columbia, Puerto Ricoand all states.

2016 BY-LINE BUSINESS ($000)Reinsurance Reinsurance

———DPW——— —Prem Assumed— —Prem Ceded—Product Line ($000) (%) ($000) (%) ($000) (%)Workers’ Comp 37,953 8.9 33,567 41.0 2,263 1.1Comm’l Auto Liab 63,680 15.0 2,399 2.9 7,970 3.9Com’l MultiPeril 39,881 9.4 12,673 15.5 8,138 4.0Auto Physical 27,744 6.5 640 0.8 1,376 0.7Oth Liab Occur 35,962 8.5 10,964 13.4 23,610 11.6Ocean Marine 57,013 13.4 472 0.6 35,181 17.3Fire 44,962 10.6 8,363 10.2 39,514 19.4Homeowners 10,308 2.4 734 0.9 368 0.2Priv Pass Auto Liab 8,210 1.9 2,523 3.1 256 0.1Allied Lines 31,703 7.5 3,727 4.5 26,522 13.0Prod Liab Occur 13,301 3.1 1,763 2.2 7,100 3.5Inland Marine 19,021 4.5 241 0.3 14,728 7.2Aircraft 19,066 4.5 … … 19,066 9.4All Other 15,733 3.7 3,897 4.8 17,715 8.7

Total 424,538 100.0 81,962 100.0 203,807 100.0



Business———NPW——— Retention

Product Line ($000) (%) (%)Workers’ Comp 69,257 22.9 97.1Comm’l Auto Liab 58,109 19.2 90.6Com’l MultiPeril 44,416 14.7 92.8Auto Physical 27,007 8.9 97.0Oth Liab Occur 23,317 7.7 54.7Ocean Marine 22,305 7.4 39.0Fire 13,811 4.6 26.4Homeowners 10,673 3.5 96.7Priv Pass Auto Liab 10,477 3.5 97.6Allied Lines 8,908 2.9 26.0Prod Liab Occur 7,964 2.6 59.3Inland Marine 4,533 1.5 23.7Aircraft … … …All Other 1,915 0.6 11.8

Total 302,692 100.0 67.3

BY-LINE RESERVES ($000)Product Line 2016 2015 2014 2013 2012Workers’ Comp 321,783 325,860 340,096 342,403 325,824Comm’l Auto Liab 91,457 87,955 73,083 68,641 74,843Com’l MultiPeril 46,906 42,343 36,996 36,280 33,866Auto Physical -2,277 -3,872 -3,371 -3,601 -1,409Oth Liab Occur 147,890 147,001 162,617 159,520 168,705Ocean Marine 9,220 9,781 7,272 4,629 14,135Fire 2,881 3,241 6,096 37,099 53,984Homeowners 3,401 2,345 2,517 2,130 1,868Priv Pass Auto Liab 12,624 9,371 7,751 7,301 8,390Allied Lines 28,219 30,911 15,500 8,372 10,498Prod Liab Occur 38,798 35,055 30,149 32,063 35,517Inland Marine 726 649 214 812 352All Other 63,365 56,394 68,126 66,997 62,966

Total 764,994 747,036 747,046 762,646 789,538

GEOGRAPHIC BREAKDOWN BYDIRECT PREMIUM WRITINGS ($000)

2016 2015 2014 2013 2012California 123,592 116,397 119,385 118,617 105,726Texas 37,002 38,696 35,388 32,293 24,855New York 26,763 30,336 26,139 29,691 26,868New Jersey 26,108 25,432 23,013 24,837 19,588Florida 19,625 17,685 18,150 16,366 14,978Illinois 18,569 26,178 21,779 21,404 17,311Georgia 16,038 13,909 11,691 11,936 11,302Ohio 12,984 13,570 12,632 11,653 10,617Kentucky 12,084 10,655 9,576 9,736 7,406Michigan 8,762 7,900 6,238 6,139 6,351All Other 123,012 115,607 109,395 103,363 92,666

Total 424,538 416,365 393,386 386,036 337,667

RISK MANAGEMENT

As part of its risk management culture, the organization has an ERMcommittee and Strategic Planning Department in charge of ERM that definerisk categories and manage risk in an integrated manner. Business unitmanagers meet quarterly to monitor existing risks and identify emerging risks.Risk monitoring is reported by senior management to the highest levels of theultimate parent, which plays a role in defining risk appetite/risk tolerances atthe corporate and underwriting level. The U.S. based management teammeasures exposure among all risk correlations by applying a group wide riskquantification model to manage insurance risks as well as the aggregation andcorrelation of all major risks.


TMNF’s risk management is in line with the Tokio Marine Group’s ERMframework. The risk appetite statement sets forth that the group will conductrisk taking mainly in insurance underwriting and investments while ensuring abalance between risk and capital that enables it to continue doing businesseven under stress scenarios.

The group takes strategic management decisions and deploys capital basedon an analysis of capital efficiency. Therefore, the results of group companiesare regularly reviewed to achieve sustainable growth of profits in eachbusiness domain. The group has developed its own internal economicsolvency capital model to quantify its capital adequacy and ensure financialsoundness, with risk capital calculations based on 99.95% value at risk (VaR).Capital buffers are managed in order to provide flexibility for businessinvestments, share repurchases or changes in the regulatory and operatingenvironments.

The group runs stress tests on scenarios ensure that the capitalization issufficient to absorb any potential losses.



OPERATING PERFORMANCE


Operating Results: TMNF reported a non-consolidated net profit of JPY 249billion in fiscal year 2016, compared to JPY 302 billion in fiscal year 2015.This reduction was mainly due to a strong decline in investment results, drivenby lower dividends received from its subsidiaries. Underwriting results, incontrast, materially improved from JPY 14 billion in fiscal year 2015 to JPY116 billion in fiscal year 2016, primarily reflecting lower losses related tonatural catastrophes and lower provisions for catastrophe loss reserves.

TMNF’s non-consolidated operating ratio increased from 76.0% in fiscalyear 2015 to 82.0% in fiscal year 2016 chiefly due to lower net investmentincome. The ratio remains below the five-year average of 83.7%.

The company expects to achieve a net profit of JPY 270 billion in fiscal year2017 as a result of an improvement in underwriting results and an increase individends from subsidiaries.

PROFITABILITY ANALYSIS ($000)———————————Company———————————

Pre-tax After-taxPeriod Operating Operating Net TotalEnding Income Income Income Return2012 -1,325 10,296 7,942 17,7732013 15,939 13,422 16,038 16,0462014 15,614 20,562 25,364 25,3742015 16,066 12,726 17,819 17,8282016 -6,653 -1,803 -44 1,900

5-Yr Total 39,640 55,202 67,118 78,921

————Company———— ——Industry Composite——Period Pre-tax Return Operating Pre-tax Return OperatingEnding ROR (%) on PHS (%) Ratio (%) ROR (%) on PHS (%) Ratio (%)2012 -0.5 3.0 96.0 9.2 8.1 90.22013 6.2 3.2 92.1 18.5 13.3 81.62014 6.3 5.0 96.4 15.2 11.9 84.42015 5.4 3.5 96.6 14.6 6.6 85.22016 -2.2 0.4 103.0 12.1 8.1 88.1

5-Yr Avg 2.9 3.0 97.0 13.9 9.6 85.9

Underwriting Results: The company’s non-consolidated NPW slightlydeclined year on year (YoY) from JPY 2,128 billion in fiscal year 2015 to JPY2,116 billion in fiscal year 2016. The decline was mainly attributed to fireinsurance, which had experienced strong demand in fiscal year 2015 ahead ofproduct revisions. On the other hand, auto insurance NPW increased by 2%,driven by premium rate hikes and the sales of new policies.

As previously stated in this report, underwriting profit increased from JPY14 billion in fiscal year 2015 to JPY 116 billion in fiscal year 2016 due to adecline in net incurred losses related to natural catastrophes and lowerprovisions for catastrophe loss reserves.

TMNF’s loss ratio (private insurance, earned income basis) has beenimproving over the past five years, declining from 66.8% in fiscal year 2012 to57.7% in fiscal year 2016. The trend was mainly driven by improvements inthe voluntary auto insurance loss ratio over the period.

The expense ratio (private insurance basis) remained relatively stable YoYat 32.7% in fiscal year 2016, compared to 32.6% in fiscal year 2015, as thedecline in NPW was almost fully offset by the decrease in business expenses.

The combined ratio (private insurance, E/I basis) declined YoY to 90.4%from 92.7% in fiscal year 2015.

For fiscal year 2017, overall NPW growth (private insurance) is expected tobe 1.6%, chiefly driven by growth in auto insurance and liability insurance.The underwriting profit is expected to improve to JPY 130 billion, while theloss ratio (private insurance, E/I basis) is expected to remain stable at 57.8%. Itis anticipated that a decline in net incurred losses related to naturalcatastrophes will be offset by an increase in large losses, which were relativelylow in fiscal year 2016. The expense ratio is expected to remain relativelystable at 32.6% with expenses increasing in line with NPW growth. As aresult, expectations are that the combined ratio will remain unchanged at90.4% in fiscal year 2017.

UNDERWRITING EXPERIENCE

PeriodEnding

Net UndrwIncome($000)

—Loss Ratios— —Expense Ratios— IndPureLoss LAE

Loss &LAE

NetComm.

OtherExp.

TotalExp.

Div.Pol.

Comb.Ratio

Comb.Ratio

2012 -45,534 67.5 11.3 78.8 6.5 30.7 37.3 0.1 116.1 105.42013 -29,849 55.8 18.0 73.8 5.2 30.2 35.3 0.1 109.2 97.72014 -32,074 61.3 15.4 76.7 4.7 31.6 36.4 0.0 113.1 98.22015 -32,551 58.9 19.1 78.0 4.9 26.7 31.6 0.0 109.6 99.22016 -44,349 58.8 16.5 75.4 4.7 34.5 39.2 0.0 114.6 101.8

5-Yr Total/Avg -184,357 60.3 16.2 76.5 5.2 30.7 35.9 … 112.4 100.4



BY-LINE LOSS RATIOProduct Line 2016 2015 2014 2013 2012 5-Yr AvgWorkers’ Comp 50.6 53.3 61.1 70.0 71.2 60.7Comm’l Auto Liab 67.0 88.0 85.2 70.0 -9.9 63.7Com’l MultiPeril 44.5 42.4 30.3 116.7 92.6 62.5Auto Physical 64.2 68.3 66.8 85.0 86.0 71.8Oth Liab Occur 44.8 13.8 53.3 26.9 -99.9 2.2Ocean Marine 55.3 65.0 65.5 62.5 64.0 62.5Fire 12.9 5.8 57.2 -17.3 143.8 50.8Homeowners 33.8 26.2 28.6 39.7 27.1 31.0Priv Pass Auto Liab 112.5 78.6 82.5 53.3 78.0 82.2Allied Lines 47.4 143.9 75.4 34.1 150.4 89.1Prod Liab Occur 119.5 109.8 1.2 -26.3 -99.9 32.3Inland Marine 95.6 64.0 88.5 23.6 970.3 239.1All Other 527.9 -17.6 280.9 299.7 304.8 278.6

Total 58.8 58.9 61.3 55.8 67.5 60.3

DIRECT LOSS RATIO BY STATE2016 2015 2014 2013 2012 5-Yr Avg

California 52.9 32.0 38.9 32.6 292.3 85.8Texas 59.5 20.8 26.9 93.6 -26.8 36.7New York 44.3 95.2 44.4 205.3 41.1 87.2New Jersey 55.5 64.3 22.5 67.9 398.5 110.9Florida 46.2 25.1 37.8 10.0 6.2 26.6Illinois 57.6 27.5 38.9 50.8 -16.4 32.8Georgia 39.9 47.6 35.1 244.4 480.3 155.0Ohio 66.4 42.6 35.4 57.8 34.0 47.6Kentucky 33.1 20.2 42.8 22.7 -15.9 22.7Michigan 23.2 -36.9 193.5 -8.6 -1.6 30.7All Other 38.6 40.2 56.8 66.8 22.8 44.9

Total 47.7 38.6 44.3 69.2 138.8 65.0

Investment Results: Non-consolidated net investment income decreased byJPY 154 billion in fiscal year 2016 to JPY 218 billion. This reduction wasmainly driven by lower dividend income from its subsidiaries in comparison tothe amount received in fiscal year 2015, where TMNF received extradividends from subsidiaries to support the acquisition of HCC InsuranceHoldings, Inc. Net capital gains declined from JPY 116 billion in fiscal year2015 to JPY 88 billion in fiscal year 2016, reflecting lower gains on sales offoreign securities.

As part of the ERM initiatives to manage investment risks, TMNFcontinued to scale down its exposure to business-related equities. The totalamount sold in fiscal year 2016 was worth JPY 117 billion. Gains from thesales of domestic business-related equities reached JPY 85 billion over theyear. These gains provide support to the company’s net investment incomeamidst the ultra-low interest rate environment in Japan.

Net investment yield (including capital gains) declined from 4.4% in fiscalyear 2015 to 2.6% in fiscal year 2016, falling behind the five-year average netinvestment yield of 2.9%. To support its investment income, TMNF has takeninitiatives such as outsourcing a portion of its invested assets to Delphi

Financial Group Inc., its subsidiary with stronger expertise in assetmanagement.

INVESTMENT GAINS ($000)——————————Company——————————

Net Realized UnrealizedInv Capital Capital

Year Income Gains Gains2012 49,872 -2,354 9,8312013 44,105 2,616 82014 41,498 4,802 102015 38,574 5,093 102016 34,819 1,759 1,944

5-Yr Total 208,868 11,916 11,803

———————Company——————— Industry CompositePre-taxInvest

Inv Inc Inv Return on Total Inv Inc InvGrowth Yield Inv Assets Return Growth Yield

Year (%) (%) (%) (%) (%) (%)2012 -9.4 3.8 3.6 4.6 -1.8 4.12013 -11.6 3.7 3.9 4.0 8.0 4.42014 -5.9 3.6 4.0 4.1 -11.6 3.82015 -7.0 3.3 3.8 4.0 1.6 3.82016 -9.7 2.9 3.1 3.3 -1.0 3.8

5-Yr Avg -8.8 3.5 3.7 4.0 -1.1 4.0

BALANCE SHEET STRENGTH


Capitalization: TMNF’s consolidated adjusted capital and surplus (i.e.,shareholders’ funds + catastrophe reserves + price fluctuation reserves)increased by 6% in fiscal year 2016 to JPY 4,224 billion. This increase wasmainly driven by retained earnings, which increased by 19% from JPY 1,040billion in fiscal year 2015 to JPY 1,238 billion in fiscal year 2016.

The company regularly monitors its capital adequacy at both the group andTMNF levels by utilizing its internal economic solvency capital model.

Current BCAR: 259.0



CAPITAL GENERATION ANALYSIS ($000)————————Source of Surplus Growth————————

Pre-tax Realized UnrealizedOperating Capital Income Capital

Year Income Gains Taxes Gains2012 -1,325 -2,354 -11,621 9,8312013 15,939 2,616 2,517 82014 15,614 4,802 -4,948 102015 16,066 5,093 3,340 102016 -6,653 1,759 -4,849 1,944

5-Yr Total 39,640 11,916 -15,561 11,803—————Source of Surplus Growth—————

Net Change % ChgContrib. Other in in

Year Capital Changes PHS PHS2012 -225,734 7,928 -200,033 -28.62013 … -738 15,308 3.12014 -35,000 -7,428 -17,054 -3.32015 12,960 -17,520 13,268 2.72016 … 26,814 28,714 5.6

5-Yr Total -247,774 9,056 -159,797 -5.1

QUALITY OF SURPLUS ($000)Surplus Other Contributed Unassigned

Year Notes Debt Capital Surplus2012 … … 5,400 493,6652013 … … 27,650 486,7242014 … … 33,180 464,1402015 … … 206,095 304,4932016 … … 208,996 330,306

Year-End Conditional AdjustedYear PHS Reserves PHS2012 499,065 1,512 500,5772013 514,374 2,057 516,4312014 497,319 2,332 499,6512015 510,588 1,761 512,3492016 539,301 4,280 543,582

LEVERAGE ANALYSIS

PeriodEnding

—————Company———— ————Industry Composite————

NPW toPHS

Res.to

PHSNetLev.

GrossLev.

NPW toPHS

Res.to

PHSNetLev.

GrossLev.

2012 0.5 1.6 2.3 3.2 0.7 1.4 2.8 3.72013 0.5 1.5 2.2 3.3 0.7 1.4 2.7 3.62014 0.5 1.5 2.2 3.5 0.7 1.4 2.8 3.62015 0.6 1.5 2.3 3.5 0.7 1.4 2.9 3.72016 0.6 1.4 2.2 3.5 0.7 1.4 2.9 3.8

CEDED REINSURANCE ANALYSIS ($000)

PeriodEnding

——————Company—————— ——Industry Composite——

CededReins. Total

Bus.Ret.(%)

Reins.Recov. toPHS (%)

CededReins. toPHS (%)

Bus.Ret.(%)



2012 460,266 72.8 71.6 92.2 80.4 60.7 85.22013 552,981 66.3 81.7 107.5 78.8 57.5 82.82014 634,848 59.0 89.1 127.7 80.2 56.2 81.32015 624,971 69.9 86.4 122.4 77.8 58.8 86.92016 661,179 67.3 84.9 122.6 76.2 64.8 94.5

2016 REINSURANCE RECOVERABLES ($000)Paid &UnpaidLosses IBNR

UnearnedPremiums

OtherRecov*

TotalReinsRecov

US Affiliates.................... 127 465 202 … 794Foreign Affiliates............. 65,799 125,481 66,006 3,668 260,954US Insurers ..................... 85,155 76,548 12,998 771 175,472Pools/Associations........... … … 3 -38 -35Other Non-US................. 2,578 13,157 5,729 -162 21,302

Total (ex US Affils) ...... 153,532 215,186 84,736 4,239 457,693Grand Total.................... 153,659 215,651 84,938 4,239 458,487

* Includes Commissions less Funds Withheld

Loss Reserves: The outstanding claims loss reserve balance on anon-consolidated basis increased by JPY 5 billion to JPY 900 billion as at theend of March 2017. Net incurred losses related to natural catastrophes alonedeclined by JPY 20 billion to JPY 54 billion at the end of fiscal year 2016.Catastrophe loss reserves strengthened by JPY 43 billion to JPY 1,067 billionover the same period.

LOSS & ALAE RESERVE DEVELOP.: CALENDAR YEAR ($000)

CalendarYear

Orig.Loss

Reserves

DevelopedReserves

Thru LatestYear End

Develop.to

Orig. (%)

Develop.to

PHS (%)

Develop.to

NPE (%)

UnpaidReserves@LatestYear End

UnpaidRes. to

Develop. (%)2011 693,891 604,545 -12.9 -12.8 260.6 324,220 53.62012 717,461 688,170 -4.1 -5.9 277.4 363,126 52.82013 695,027 696,559 0.2 0.3 270.5 409,944 58.92014 680,442 673,418 -1.0 -1.4 270.3 473,897 70.42015 684,712 676,092 -1.3 -1.7 228.8 569,400 84.22016 710,420 710,420 … … 235.5 710,420 100.0



LOSS & ALAE RESERVE DEVELOP.: ACCIDENT YEAR ($000)

AccidentYear

Orig.Loss

Reserves

DevelopedReserves

Thru LatestYear End

Develop.to

Orig. (%)


Acc. YrLoss

Ratio

Acc. YrComb.Ratio

2011 112,181 113,817 1.5 23,679 79.3 120.22012 161,654 135,070 -16.4 38,906 102.0 139.32013 123,919 125,311 1.1 46,818 87.6 123.12014 111,203 110,976 -0.2 63,953 73.4 109.82015 137,047 132,027 -3.7 95,503 75.5 107.22016 141,020 141,020 … 141,020 80.2 119.4

ASBESTOS & ENVIRONMENTAL (A&E) RESERVE ANALYSIS

Year

———————Company——————— —Industry Composite—

Net A&EReserve($000)

ReserveReten-

tion(%)

NetIBNRMix(%)

SurvivalRatio(3yr)

Comb.Ratio

Impact(1 yr)

Comb.Ratio

Impact(3 yr)

SurvivalRatio(3 yr)

Comb.Ratio

Impact(1 yr)

Comb.Ratio

Impact(3 yr)

2012 76,859 90.2 23.0 XX 18.5 XX XX 1.4 XX2013 78,164 93.1 46.7 XX 2.8 XX XX 1.5 XX2014 82,747 91.4 47.6 15.4 3.7 8.3 7.4 1.0 1.32015 69,602 86.8 45.0 7.6 1.2 2.5 7.6 1.6 1.42016 66,519 78.4 42.9 7.1 1.2 1.9 6.3 1.4 1.3

LIQUIDITY ANALYSIS

PeriodEnding

—————Company————— ————Industry Composite————

QuickLiq. (%)

CurrentLiq. (%)

OverallLiq. (%)

GrossAgents Bal.to PHS (%)

QuickLiq. (%)

CurrentLiq. (%)

OverallLiq. (%)


2012 40.0 137.4 156.4 5.5 22.6 106.1 147.0 10.42013 31.0 138.5 159.6 5.4 24.0 109.0 148.2 10.22014 34.7 138.0 158.8 7.0 24.0 108.2 148.1 10.22015 19.8 118.8 160.4 7.8 21.6 104.4 146.2 10.92016 19.0 119.4 160.3 7.7 21.0 103.7 145.5 11.8

CASH FLOW ANALYSIS ($000)—————————Company————————— Industry CompositeUnderw Oper Net Underw Oper Underw Oper

Cash Cash Cash Cash Cash Cash CashYear Flow Flow Flow Flow (%) Flow (%) Flow (%) Flow (%)2012 -10,914 23,798 -2,440 96.1 108.0 99.6 113.62013 -60,666 -10,486 906 81.0 96.7 101.7 114.62014 -55,668 7,127 -5,893 80.8 102.5 102.9 113.82015 -50,364 10,614 -4,036 85.6 103.0 101.0 111.92016 -6,823 41,836 19,785 97.8 113.3 103.0 113.3

5-Yr Total -184,435 72,889 8,323 … … … …

INVESTMENT LEVERAGE ANALYSIS (% OF PHS)

PeriodEnding

—————————Company—————————Industry

—Composite—Class3-6

Bonds

RealEstate/Mtg.

OtherInvestedAssets

CommonStocks

Non-Affil.Inv.Lev.

Affil.Inv.

Class3-6

BondsCommon

Stocks2012 … … … 0.0 0.0 … 6.1 10.32013 … … … 0.0 0.0 … 6.7 14.52014 0.3 … … 0.0 0.4 … 7.2 16.12015 0.1 … … 0.0 0.1 28.6 8.1 14.62016 1.9 … … 0.0 1.9 30.6 10.5 13.5

INVESTMENTS - SECURITIESCurrent Year Distribution of Bonds By Maturity

————————Years———————— Yrs-Avg0-1 1-5 5-10 10-20 20+ Maturity

Government 2.2 3.0 8.1 0.2 0.0 5Gov’t Agencies & Muni 1.8 6.1 23.9 3.4 3.9 9Industrial & Misc 4.9 27.0 9.7 2.8 2.9 6

Total 8.9 36.0 41.7 6.4 6.9 72016 2015 2014 2013 2012

Bonds (000) 1,003,959 980,072 1,123,806 1,145,635 1,164,357US Government 13.0 14.5 10.8 12.7 21.1Foreign Government … … 2.4 4.5 4.3Foreign - All Other 5.0 5.4 6.3 7.8 7.3State/Special Revenue - US 39.4 38.8 34.4 24.3 18.2Industrial & Misc - US 42.5 41.3 46.1 50.7 49.1

Private Issues 9.7 8.2 4.9 … 0.1Public Issues 90.3 91.8 95.1 100.0 99.9

Bond Quality (%) 2016 2015 2014 2013 2012Class 1 92.1 95.1 98.9 99.0 98.5Class 2 6.9 4.8 1.0 1.0 1.5Class 3 1.0 … 0.1 … …Class 6 0.0 0.0 … … …

INVESTMENTS - EQUITIES2016 2015 2014 2013 2012

Stocks (000) 165,095 145,926 116 106 98Unaffiliated Common 0.1 0.1 100.0 100.0 100.0Affiliated Common 99.9 99.9 … … …



INVESTMENTS - OTHER INVESTED ASSETS2016 2015 2014 2013 2012

Other Inv Assets (000) 66,572 36,787 40,823 46,715 45,809Cash 85.0 85.6 71.8 20.6 13.3Short-Term … 14.4 28.2 79.4 86.7All Other 15.0 … … … …

HISTORY

The company was incorporated on August 13, 1998, under the laws of theState of New York, as TM Casualty Insurance Company. It was licensed onSeptember 23, 1999, to write workers’ compensation and employers’ liabilityinsurance. Effective March 15, 2012, the company changed its name to TokioMarine America Insurance Company. Paid-in capital of $190,609,748 iscomprised of 50,001 shares of common stock at a par value of $100 per shareand $185,609,648 of contributed surplus. All authorized shares are issued andoutstanding.

Tokio Marine & Nichido Fire Insurance Co., Ltd. (United States Branch)(TMNF-US) was established in 1955 with a New York port of entry to engagein business on behalf of The Tokio Marine and Fire Insurance Company,Limited, located in Tokyo, Japan. The parent was founded in 1879, and wasactive in the United States since 1911, although operations were suspendedbetween 1941 and 1955.

The Tokio Marine and Fire Insurance Company, Limited, and The NichidoFire and Marine Insurance Company Limited (Nichido Japan) integrated theirmanagement and business under a publicly traded Japanese holding companycalled Millea Holdings, Inc. (Millea). The companies became wholly ownedsubsidiaries of Millea on April 1, 2002, in a statutory share exchange underJapanese law. When the merger was finalized on October 1, 2004, the mergedentity commenced operations as a new property and casualty insurancecompany, Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF), withMillea as its publicly traded holding company. Effective July 1, 2008, Milleachanged its name to Tokio Marine Holdings, Inc.

Nichido Japan’s U.S. Branch was domesticated on July 1, 2004, in order tocomply with U.S. insurance regulations prohibiting an alien insurer frommaintaining two U.S. branches. On February 11, 2004, TNUS InsuranceCompany (TNUS) was formed under the laws of the State of New York as thevehicle for the domestication of Nichido Japan’s U.S. Branch. Upondomestication, TNUS became a wholly owned subsidiary of TMNF.

Effective September 30, 2012, the common stock of Tokio MarineManagement, Inc. (TMM), TPI and TMS was transferred by TMNF-US toTMNF. Subsequently on November 30, 2012, TMNF contributed the commonstock of TMM, TPI, TMS and TNUS to TMNA, an insurance holdingcompany domiciled in the State of Delaware and a wholly owned directsubsidiary of TMNF. Effective November 30, 2013, the common stock ofTokio Marine America Insurance Company (TMAIC) was transferred byTMNF-US to TMNF.

Effective December 31, 2013, in conjunction with its domestication,TMNF-US merged with and into TMAIC, with TMAIC remaining as the

surviving entity. All of the assets and liabilities of TMNF-US were transferredto, and assumed by TMAIC. Effective January 1, 2014, the common stock ofTMAIC was transferred by TMNF to TMNA.

Effective December 31, 2015, the common stock of TMM, TPI, TMS andTNUS was transferred by TMNA to TMAIC.

TMAIC provides quota share reinsurance to TPI, TMS and TNUS, whereby100% of all premiums, losses and loss adjustment expenses are ceded toTMAIC.

MANAGEMENT

Day-to-day operations of the company is under the direction of a U.S. basedmanagement team that receives support from Tokio Marine Management,Inc., a wholly owned subsidiary of Tokio Marine America InsuranceCompany.

Officers: President and Chief Executive Officer, Koki Umeda; ExecutiveVice President and Chief Financial Officer, Karen A. Gilmer-Pauciello;Senior Vice President and Treasurer, Michael Kelly; Secretary and GeneralCounsel, Edward Sayago.

Directors: Ann Ginn, B. Steven Goldstein, David Gottschall, Tomoya Kittaka,Adam LaPierre, Lawrence Stern, Koki Umeda.

REGULATORY

An examination of the financial condition was made as of December 31,2015, by the insurance department of New York. The 2016 annual independentaudit of the company was conducted by PricewaterhouseCoopers, LLP. Theannual statement of actuarial opinion is provided by Mark R. Proska, FCAS,MAAA, TMNA Services, LLC.

REINSURANCE

TMAIC benefits from an extensive reinsurance program. Property per riskexcess of loss treaties afford coverage of $225.0 million in excess of a $5.0million retention. The program consists of structured layers with a minimalpercentage retention by TMAIC in select layers. In total, TMAIC retains $33.5million. Property catastrophe treaties afford $85.0 million of coverage over a$50.0 retention by TMAIC. This program provides includes earthquake andterrorism coverage only above a predetermined level. Casualty risks areaddressed through a combination of excess of loss, umbrella, and clash coverprograms. Retention by TMAIC on these programs is limited to $9.915million. For marine exposures, the retention is $2.0 million, with excess of losstreaties providing capacity up to $110.0 million. TMNF is a significantparticipant across all treaties. Facultative reinsurance is also maintained for acertain population of risks.




The company manages natural catastrophe risks in order to continuouslyexpand profits and better manage its risk portfolio so capital and funds can beeffectively allocated to more capital-efficient new businesses.

The retention level of each product line is decided based on the risk-returnbalance in line with the company’s capacity. The aim is to stabilizeunderwriting results. The company also monitors the reinsurancecounterparty risk by selecting reinsurers of sound financial strength andsetting corresponding maximum exposure limits.

BALANCE SHEET

ADMITTED ASSETS ($000)YE 2016 YE 2015 ’16% ’15%

Bonds .............................................. 1,003,959 980,072 69.5 72.0Common stock.................................. 134 126 0.0 0.0Cash and short-term invest ................. 56,572 36,787 3.9 2.7Other non-affil inv asset ..................... 10,000 … 0.7 …Investments in affiliates ...................... 164,961 145,800 11.4 10.7

Total invested assets....................... 1,235,626 1,162,786 85.5 85.5Premium balances ............................. 107,513 108,021 7.4 7.9Accrued interest ................................ 9,489 9,093 0.7 0.7All other assets.................................. 92,003 80,645 6.4 5.9

Total assets................................... 1,444,631 1,360,546 100.0 100.0

LIABILITIES & SURPLUS ($000)YE 2016 YE 2015 ’16% ’15%

Loss & LAE reserves .......................... 764,994 747,036 53.0 54.9Unearned premiums........................... 138,080 137,363 9.6 10.1Conditional reserve funds ................... 4,280 1,761 0.3 0.1All other liabilities ............................ -2,025 -36,202 -0.1 -2.7

Total liabilities ............................. 905,330 849,958 62.7 62.5Capital & assigned surplus.................. 208,996 206,095 14.5 15.1Unassigned surplus............................ 330,306 304,493 22.9 22.4

Total policyholders’ surplus............ 539,301 510,588 37.3 37.5

Total liabilities & surplus ............... 1,444,631 1,360,546 100.0 100.0

SUMMARY OF 2016 OPERATIONS ($000)

Statement of Income 2016Funds Provided from

Operations 2016Premiums earned............ 301,667 Premiums collected......... 307,830

Losses incurred ............ 177,489Benefit & loss-related pmts

194,352LAE incurred .............. 49,922Undrw expenses incurred

118,593LAE & undrw expenses paid

120,288Div to policyholders ..... 12 Div to policyholders ..... 12

Net underwriting income -44,349 Undrw cash flow ............ -6,823Net investment income.... 34,819 Investment income.......... 38,802

Other income/expense ... 2,877 Other income/expense ... 4,133

Pre-tax oper income ... -6,653Pre-tax cash operations

36,112Realized capital gains...... 1,759Income taxes incurred ..... -4,849 Income taxes pd (recov)... -5,724

Net income................ -44 Net oper cash flow...... 41,836

—— ♦ ——


TM SPECIALTY INSURANCE COMPANYPhoenix, AZ

1221 Avenue of the Americas, Suite 1500, New York, NY 10020-1001Web: www.tmamerica.com

Tel: 212-297-6600 Fax: 212-297-6062AMB#: 012295 NAIC#: 10738Ultimate Parent#: 058633 FEIN#: 91-1932966



The company’s rating reflects its reinsurance agreement with TokioMarine America Insurance Company (AMB# 012340) as a member of theTokio Marine & Nichido Fire Insurance Co., Ltd. (AMB# 090909).

RATING RATIONALE


Rating Rationale: The ratings for Tokio Marine and Nichido Fire InsuranceCompany, Limited (TMNF), reflect its strong risk-adjusted capitalization,



track record of profitable operating performance and favorable businessprofile.




While positive rating actions are unlikely in the near term, negative ratingactions could occur if there is a material decline in TMNF’s risk-adjustedcapitalization due to either a consistent deterioration in the company’soperating performance or a negative impact from large-scale catastropheevents.



Best’sFSR

08/18/17 A++ 08/22/14 A++08/19/16 A++ 05/15/14 A++08/21/15 A++ 08/22/13 A++


PeriodEnding


NetPremiumsWritten

Pre-taxOperating

IncomeNet

Income

TotalAdmitted

Assets


2012 2,913 … 750 520 37,773 37,5302013 71 … 424 284 38,025 37,8062014 76 … 657 516 38,477 38,3242015 76 … 873 685 39,198 39,004

2016 76 … 890 669 39,80639,673


PeriodEnding

Comb.Ratio

Inv.Yield(%)

Pre-taxROR(%)

NAInvLev

NPWto

PHSNetLev.

OverallLiq.(%)

Oper.Cash

flow (%)2012 … 1.3 … … … 0.0 999.9 999.92013 … 1.2 … … … 0.0 999.9 689.32014 … 1.8 … … … 0.0 999.9 548.72015 … 2.4 … … … 0.0 999.9 531.42016 … 2.4 … 0.2 … 0.0 999.9 477.3

5-Yr … 1.8 … … … … … …

(*) Within several financial tables of this report, this company is compared against theSurplus Lines Composite.


BUSINESS PROFILE

TM Specialty was incorporated in October 1998, under the laws of the Stateof Arizona to act as an excess and surplus lines carrier of domestic propertyand casualty insurance. Effective June 1, 2012, the company ceased writingnew business.





Fiscal year 2017 is the last year of Tokio Marine group’s mid-term businessplan, named “To Be a Good Company 2017.” The group is expected to reachits major targets set forth in this plan: an adjusted ROE in the upper 9% range;adjusted net income of around JPY 400 billion, compared to JPY 407 billion in



fiscal year 2016; and an enhanced dividend per share. Over the three-yearplan, business and risk diversification significantly improved due to theremarkable overseas expansion activities.


PeriodEnding




2012 2,913 -60.7 … … 2,913 -60.72013 71 -97.6 … … 71 -97.62014 76 7.1 … … 76 7.12015 76 … … … 76 …2016 76 … … … 76 …

5-Yr CAGR … -60.0 … … … -60.0

PeriodEnding

————NPW———— ————NPE————($000) (% Chg) ($000) (% Chg)

2012 … … … 100.02013 … … … …2014 … … … …2015 … … … …2016 … … … …

5-Yr CAGR … … … -99.9

Territory: The company is licensed in Arizona.


———DPW——— —Prem Assumed— —Prem Ceded—Product Line ($000) (%) ($000) (%) ($000) (%)Oth Liab Occur 76 100.0 … … 76 100.0

Total 76 100.0 … … 76 100.0


Product Line ($000) (%) (%)Oth Liab Occur … … …

Total … … …

BY-LINE RESERVES ($000)Product Line 2016 2015 2014 2013 2012Oth Liab Occur 7 … … 15 69All Other … … … 5 …

Total 7 … … 20 69


2016 2015 2014 2013 2012New York 76 76 76 88 194California … … … -17 2,600All Other … … … … 120

Total 76 76 76 71 2,913

RISK MANAGEMENT













Pre-tax After-taxPeriod Operating Operating Net TotalEnding Income Income Income Return2012 750 504 520 5202013 424 279 284 2842014 657 503 516 5162015 873 669 685 6852016 890 672 669 668

5-Yr Total 3,594 2,628 2,674 2,673

————Company———— ——Industry Composite——Period Pre-tax Return Operating Pre-tax Return OperatingEnding ROR (%) on PHS (%) Ratio (%) ROR (%) on PHS (%) Ratio (%)2012 … 1.4 … 22.8 9.6 76.22013 … 0.8 … 41.3 14.7 59.52014 … 1.4 … 30.4 11.8 68.42015 … 1.8 … 29.5 5.2 69.42016 … 1.7 … 20.9 7.0 77.6

5-Yr Avg … 1.4 … 28.5 9.6 70.6






For fiscal year 2017, overall NPW growth (private insurance) is expected tobe 1.6%, chiefly driven by growth in auto insurance and liability insurance.The underwriting profit is expected to improve to JPY 130 billion, while theloss ratio (private insurance, E/I basis) is expected to remain stable at 57.8%. Itis anticipated that a decline in net incurred losses related to naturalcatastrophes will be offset by an increase in large losses, which were relativelylow in fiscal year 2016. The expense ratio is expected to remain relativelystable at 32.6% with expenses increasing in line with NPW growth. As a

result, expectations are that the combined ratio will remain unchanged at90.4% in fiscal year 2017.


PeriodEnding



Loss &LAE

NetComm.

OtherExp.

TotalExp.

Div.Pol.

Comb.Ratio

Comb.Ratio

2012 272 … … … … … … … … 99.52013 -6 … … … … … … … … 93.42014 20 … … … … … … … … 86.52015 … … … … … … … … … 86.92016 -7 … … … … … … … … 92.8

5-Yr Total/Avg 279 … … … … … … … … 91.8


New York 33.6 -16.7 59.1 -66.3 -2.0 0.5California … … … -99.9 -22.4 -49.0All Other … … … 999.9 -99.9 -99.9

Total 40.3 -16.7 -99.9 -90.3 -25.0 -37.1



Net investment yield (including capital gains) declined from 4.4% in fiscalyear 2015 to 2.6% in fiscal year 2016, falling behind the five-year average netinvestment yield of 2.9%. To support its investment income, TMNF has takeninitiatives such as outsourcing a portion of its invested assets to DelphiFinancial Group Inc., its subsidiary with stronger expertise in assetmanagement.





Year Income Gains Gains2012 478 17 …2013 430 5 …2014 636 13 …2015 873 16 …2016 897 -4 -1

5-Yr Total 3,315 46 -1



Year (%) (%) (%) (%) (%) (%)2012 -7.3 1.3 1.4 1.4 -11.7 3.92013 -10.1 1.2 1.2 1.2 29.5 5.12014 48.1 1.8 1.8 1.8 -43.9 2.82015 37.2 2.4 2.4 2.4 8.6 3.12016 2.7 2.4 2.4 2.4 -8.4 2.8

5-Yr Avg 13.0 1.8 1.9 1.8 -8.3 3.5





Current BCAR: 259.0



Year Income Gains Taxes Gains2012 750 17 247 …2013 424 5 144 …2014 657 13 153 …2015 873 16 204 …2016 890 -4 218 -1

5-Yr Total 3,594 46 966 -1—————Source of Surplus Growth—————


Year Capital Changes PHS PHS2012 … 1,394 1,914 5.42013 … -8 276 0.72014 … 2 518 1.42015 … -6 679 1.82016 … 2 670 1.7

5-Yr Total … 1,384 4,057 2.2



Year-End Conditional AdjustedYear PHS Reserves PHS2012 37,530 0 37,5302013 37,806 … 37,8062014 38,324 … 38,3242015 39,004 … 39,0042016 39,673 … 39,673

LEVERAGE ANALYSIS

PeriodEnding


NPW toPHS

Res.to

PHSNetLev.

GrossLev.

NPW toPHS

Res.to

PHSNetLev.

GrossLev.

2012 … 0.0 0.0 0.1 0.3 0.6 1.2 2.02013 … 0.0 0.0 0.0 0.2 0.5 1.1 1.92014 … … 0.0 0.0 0.3 0.4 1.1 1.92015 … … 0.0 0.0 0.3 0.4 1.1 1.92016 … 0.0 0.0 0.0 0.3 0.4 1.2 2.0




PeriodEnding


CededReins. Total

Bus.Ret.(%)



Bus.Ret.(%)



2012 5,438 … 7.2 14.5 34.9 56.5 78.92013 576 … 1.5 1.5 26.7 55.5 78.52014 97 … 0.2 0.3 27.1 53.1 76.02015 86 … 0.2 0.2 29.1 52.0 76.22016 137 … 0.3 0.3 30.5 55.0 80.2


UnearnedPremiums

OtherRecov*

TotalReinsRecov

US Affiliates.................... 25 329 1,141 … 1,495Foreign Affiliates............. 2 5 … … 7US Insurers ..................... … 70 … … 70Other Non-US................. … 49 … … 49

Total (ex US Affils) ...... 2 124 … … 126Grand Total.................... 27 453 1,141 … 1,621




AccidentYear

Orig.Loss

Reserves

DevelopedReserves

Thru LatestYear End

Develop.to

Orig. (%)


Acc. YrLoss

Ratio

Acc. YrComb.Ratio

2011 … … … … -99.9 …2012 … … … … … …2013 … … … … … …2014 … … … … … …2015 … … … … … …2016 … … … … … …

LIQUIDITY ANALYSIS

PeriodEnding


QuickLiq. (%)

CurrentLiq. (%)

OverallLiq. (%)


QuickLiq. (%)

CurrentLiq. (%)

OverallLiq. (%)


2012 999.9 999.9 999.9 … 62.7 155.5 202.0 8.62013 999.9 999.9 999.9 … 78.1 167.0 206.1 9.02014 999.9 999.9 999.9 … 87.1 172.5 213.3 9.62015 999.9 999.9 999.9 … 85.1 166.5 210.2 11.02016 999.9 999.9 999.9 … 85.3 165.1 208.3 11.1


Cash Cash Cash Cash Cash Cash CashYear Flow Flow Flow Flow (%) Flow (%) Flow (%) Flow (%)2012 -133 714 2,844 -99.9 999.9 97.3 115.52013 240 884 -3,291 528.5 689.3 72.0 95.32014 460 1,001 -253 -99.9 548.7 138.2 150.32015 235 1,086 637 742.0 531.4 116.5 130.52016 177 1,040 -170 440.5 477.3 107.6 114.9

5-Yr Total 980 4,726 -232 … … … …


PeriodEnding



Bonds

RealEstate/Mtg.

OtherInvestedAssets

CommonStocks

Non-Affil.Inv.Lev.

Affil.Inv.

Class3-6

BondsCommon

Stocks2012 … … … … … … 4.9 29.82013 … … … … … … 2.1 41.72014 … … … … … … 1.8 45.62015 … … … … … … 1.6 41.12016 0.2 … … … 0.2 … 2.3 38.0



Government 0.2 9.6 5.8 0.2 0.0 5Gov’t Agencies & Muni 2.8 6.7 19.4 3.2 5.8 10Industrial & Misc 11.3 11.5 21.6 1.6 0.3 5

Total 14.2 27.7 46.9 5.0 6.1 7



2016 2015 2014 2013 2012Bonds (000) 36,130 36,742 35,852 35,248 31,590US Government 15.7 13.6 25.2 75.7 100.0Foreign - All Other 3.5 4.8 0.7 0.7 …State/Special Revenue - US 38.0 37.9 36.2 18.2 …Industrial & Misc - US 42.8 43.6 38.0 5.3 …

Public Issues 100.0 100.0 100.0 100.0 100.0

Bond Quality (%) 2016 2015 2014 2013 2012Class 1 92.7 94.5 95.8 98.0 100.0Class 2 7.0 5.5 4.2 2.0 …Class 3 0.3 … … … …


Other Inv Assets (000) 1,364 909 271 524 3,815Cash 54.2 100.0 100.0 100.0 4.4Short-Term … … … … 95.6All Other 45.8 … … … …

HISTORY

The company was incorporated on October 22, 1998, under the laws of theState of Arizona as an excess and surplus lines carrier and commencedbusiness on January 1, 1999. Effective September 30, 2012, the common stockof the company was transferred by Tokio Marine & Nichido Fire InsuranceCo., Ltd. (United States Branch) (TMNF-US) to Tokio Marine & Nichido FireInsurance Co., Ltd. (TMNF). Subsequently on November 30, 2012, TMNFcontributed the company to Tokio Marine North America, Inc. (TMNA), aninsurance holding company domiciled in the State of Delaware and a whollyowned direct subsidiary of TMNF. Effective December 31, 2015, the commonstock of TM Specialty Insurance Company was transferred by TMNA toTokio Marine America Insurance Company.

Paid-in capital of $30,600,000 is comprised of 35,000 shares of commonstock at a par value of $100 per share and $27,100,000 of contributed surplus.All authorized shares are issued and outstanding.

MANAGEMENT

Day-to-day operations of the company are under the direction of a U.S.based management team that receives support from Tokio MarineManagement, Inc., a wholly owned subsidiary of Tokio Marine AmericaInsurance Company.

Officers: President and Chief Executive Officer, Koki Umeda; ExecutiveVice President and Chief Financial Officer, Karen A. Gilmer-Pauciello;

Senior Vice President and Treasurer, Michael Kelly; Secretary and GeneralCounsel, Edward Sayago.

Directors: Ann Ginn, B. Steven Goldstein, Tomoya Kittaka, Adam LaPierre,Koki Umeda.

REGULATORY

An examination of the financial condition was made as of August 31, 2015,by the insurance departments of Arizona and Pennsylvania. The 2016 annualindependent audit of the company was conducted byPricewaterhouseCoopers, LLP. The annual statement of actuarial opinion isprovided by Mark R. Proska, FCAS, MAAA, TMNA Services, LLC.

REINSURANCE

The company cedes 100% of all premiums written and losses incurred toTokio Marine America Insurance Company under terms of a quota sharereinsurance agreement.




BALANCE SHEET


Bonds .............................................. 36,130 36,742 90.8 93.7Cash and short-term invest ................. 739 909 1.9 2.3Other non-affil inv asset ..................... 625 … 1.6 …

Total invested assets....................... 37,494 37,650 94.2 96.1Premium balances ............................. 905 1,207 2.3 3.1Accrued interest ................................ 257 263 0.6 0.7All other assets.................................. 1,149 77 2.9 0.2

Total assets................................... 39,806 39,198 100.0 100.0




Loss & LAE reserves .......................... 7 … 0.0 …All other liabilities ............................ 125 194 0.3 0.5

Total liabilities ............................. 132 194 0.3 0.5Capital & assigned surplus.................. 30,600 30,600 76.9 78.1Unassigned surplus............................ 9,073 8,404 22.8 21.4


Total liabilities & surplus ............... 39,806 39,198 100.0 100.0



Operations 2016Premiums earned............ … Premiums collected......... 230

Losses incurred ............ …Benefit & loss-related pmts

21LAE incurred .............. 7Undrw expenses incurred

…LAE & undrw expenses paid

31

Net underwriting income -7 Undrw cash flow ............ 177Net investment income.... 897 Investment income.......... 1,087

Pre-tax oper income ... 890Pre-tax cash operations

1,264Realized capital gains...... -4Income taxes incurred ..... 218 Income taxes pd (recov)... 224

Net income................ 669 Net oper cash flow...... 1,040

—— ♦ ——


TNUS INSURANCE COMPANY1221 Avenue of the Americas, Suite 1500, New York, NY 10020-1001

Web: www.tmamerica.comTel: 212-297-6600 Fax: 212-297-6062AMB#: 003643 NAIC#: 32301Ultimate Parent#: 058633 FEIN#: 20-0940754




RATING RATIONALE


Rating Rationale: The ratings for Tokio Marine and Nichido Fire InsuranceCompany, Limited (TMNF), reflect its strong risk-adjusted capitalization,track record of profitable operating performance and favorable businessprofile.







Best’sFSR

08/18/17 A++ 08/22/14 A++08/19/16 A++ 05/15/14 A++08/21/15 A++ 08/22/13 A++


PeriodEnding


NetPremiumsWritten

Pre-taxOperating

IncomeNet

Income

TotalAdmitted

Assets


2012 11,182 … 557 318 65,150 52,7162013 15,039 … 909 605 65,689 53,0202014 12,971 … 1,508 1,171 68,808 51,7272015 15,190 … 1,694 1,266 62,454 55,2572016 19,980 … 1,758 1,392 65,195 56,579




PeriodEnding

Comb.Ratio

Inv.Yield(%)

Pre-taxROR(%)

NAInvLev

NPWto

PHSNetLev.

OverallLiq.(%)

Oper.Cash

flow (%)2012 … 2.2 … … … 0.2 524.0 -99.92013 … 2.1 … … … 0.2 518.7 -63.42014 … 2.6 … … … 0.3 464.1 188.52015 … 3.2 … … … 0.1 870.0 124.12016 … 3.2 … 0.3 … 0.1 759.0 126.8

5-Yr … 2.7 … … … … … …

(*) Within several financial tables of this report, this company is compared against theWorkers’ Compensation Composite.


BUSINESS PROFILE

TNUS is licensed to write business in 47 states and the District of Columbiaand is licensed as a reinsurer in Wyoming. The company primarily underwritesworkers’ compensation and commercial multi-peril products at preferredrates. TNUS then cedes 100% of the premiums written and losses incurred toTokio Marine America Insurance Company (TMAIC). In addition, effectiveJanuary 1, 2011, TNUS entered into a novation agreement with Tokio MarineGlobal Re Limited (TMGRe) and TMNF-US. Under this agreement, TNUSagreed to perform TMGRe’s obligation as a reinsurer under the GlobalAerospace Inc. 100% quota share reinsurance agreement originally betweenTMGRe and TMNF-US. Also, TNUS assumed 100% of the net liability forlosses occurring under all U.S. policies issued or renewed, on or after January1, 2011, by a specific producer (the assumed Global Aerospace Agreement).TNUS then ceded 100% of the net liability for this business, including lossescovered under the novation agreement to TMNF. Effective December 31,2014, the quota share agreement was terminated and commuted.



TMNF is the group’s main operating subsidiary. Combining results fromdomestic non-life business and international business, TMNF generated 94%of the group’s NPW in fiscal year 2016. Moreover, TMNF is the group’sstrategic hub with regard to overseas market expansion. The production fromoverseas business has increased from about 5% to more than 35% of overall

NPW during the past ten years. Overseas operating subsidiaries includePhiladelphia Consolidated Holding Corp., Delphi Financial Group Inc., andHCC Insurance Holdings, Inc., in North America; and Tokio Marine KilnGroup Limited and Tokio Millennium Re AG in Europe.




PeriodEnding




2012 11,182 41.1 24,469 -12.8 35,652 -0.92013 15,039 34.5 22,154 -9.5 37,193 4.32014 12,971 -13.8 11,747 -47.0 24,718 -33.52015 15,190 17.1 142 -98.8 15,332 -38.02016 19,980 31.5 7 -94.8 19,988 30.4

5-Yr CAGR … 20.3 … -80.8 … -11.1

PeriodEnding

————NPW———— ————NPE————($000) (% Chg) ($000) (% Chg)

2012 … … … …2013 … … … …2014 … … … …2015 … … … …2016 … … … …

Territory: The company is licensed in the District of Columbia, AL, AK, AZ,AR, CA, CO, CT, DE, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA, MD, MA, MI,MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI,SC, SD, TN, TX, UT, VT, VA, WA, WV and WI.




———DPW——— —Prem Assumed— —Prem Ceded—Product Line ($000) (%) ($000) (%) ($000) (%)Workers’ Comp 10,365 51.9 7 100.0 10,372 51.9Com’l MultiPeril 6,789 34.0 … … 6,789 34.0Oth Liab Occur 1,230 6.2 … … 1,230 6.2Comm’l Auto Liab 875 4.4 … … 875 4.4Prod Liab Occur 496 2.5 … … 496 2.5All Other 225 1.1 … … 225 1.1

Total 19,980 100.0 7 100.0 19,988 100.0


Product Line ($000) (%) (%)Workers’ Comp … … …Com’l MultiPeril … … …Oth Liab Occur … … …Comm’l Auto Liab … … …Prod Liab Occur … … …All Other … … …

Total … … …

BY-LINE RESERVES ($000)Product Line 2016 2015 2014 2013 2012Prod Liab Occur … 12 … 1 10Comm’l Auto Liab 62 35 20 13 72Workers’ Comp 612 934 1,313 1,694 1,787Oth Liab Occur 122 147 48 13 13Com’l MultiPeril 27 52 20 21 58All Other … … … -3 -7

Total 823 1,180 1,401 1,739 1,933


2016 2015 2014 2013 2012California 7,499 5,783 4,053 7,399 5,329New York 2,382 2,378 937 884 868Texas 2,193 671 1,009 691 726Illinois 1,565 1,374 1,762 387 554Georgia 1,091 1,048 1,307 1,179 934New Jersey 810 398 1,014 1,672 827Indiana 656 444 199 105 11Pennsylvania 375 194 68 65 75Oregon 306 169 85 0 …Michigan 297 122 177 192 134All Other 2,806 2,609 2,360 2,465 1,724

Total 19,980 15,190 12,971 15,039 11,182

RISK MANAGEMENT













Pre-tax After-taxPeriod Operating Operating Net TotalEnding Income Income Income Return2012 557 318 318 3182013 909 605 605 6052014 1,508 1,097 1,171 1,1712015 1,694 1,260 1,266 1,2662016 1,758 1,312 1,392 1,391

5-Yr Total 6,426 4,592 4,751 4,750

————Company———— ——Industry Composite——Period Pre-tax Return Operating Pre-tax Return OperatingEnding ROR (%) on PHS (%) Ratio (%) ROR (%) on PHS (%) Ratio (%)2012 … 0.6 … 5.2 7.7 93.72013 … 1.1 … 9.5 11.2 77.82014 … 2.2 … 9.2 7.4 89.72015 … 2.4 … 16.5 6.9 82.72016 … 2.5 … 17.1 10.7 81.9

5-Yr Avg … 1.8 … 11.9 8.8 85.0






For fiscal year 2017, overall NPW growth (private insurance) is expected tobe 1.6%, chiefly driven by growth in auto insurance and liability insurance.The underwriting profit is expected to improve to JPY 130 billion, while theloss ratio (private insurance, E/I basis) is expected to remain stable at 57.8%. Itis anticipated that a decline in net incurred losses related to naturalcatastrophes will be offset by an increase in large losses, which were relativelylow in fiscal year 2016. The expense ratio is expected to remain relativelystable at 32.6% with expenses increasing in line with NPW growth. As a

result, expectations are that the combined ratio will remain unchanged at90.4% in fiscal year 2017.


PeriodEnding



Loss &LAE

NetComm.

OtherExp.

TotalExp.

Div.Pol.

Comb.Ratio

Comb.Ratio

2012 -538 … … … … … … … … 112.32013 -169 … … … … … … … … 93.92014 194 … … … … … … … … 103.82015 53 … … … … … … … … 96.82016 132 … … … … … … … … 95.7

5-Yr Total/Avg -329 … … … … … … … … 100.1


California 82.5 68.1 62.7 82.1 108.8 81.4New York 50.0 128.2 131.3 31.2 84.1 84.8Texas 34.5 2.0 69.6 20.2 73.6 40.7Illinois -8.8 81.3 117.6 145.4 64.2 63.4Georgia -23.7 104.1 33.4 38.2 54.6 41.3New Jersey 234.6 -99.9 45.7 64.7 152.3 87.9Indiana 715.5 32.9 20.5 40.9 93.6 411.9Pennsylvania 20.7 118.5 46.9 81.6 71.0 66.7Oregon 59.0 67.6 49.5 … … 61.2Michigan 62.3 42.5 121.3 33.5 56.3 64.9All Other 21.4 47.8 103.0 74.8 71.7 61.8

Total 74.9 67.5 76.6 70.9 95.0 75.9



Net investment yield (including capital gains) declined from 4.4% in fiscalyear 2015 to 2.6% in fiscal year 2016, falling behind the five-year average netinvestment yield of 2.9%. To support its investment income, TMNF has takeninitiatives such as outsourcing a portion of its invested assets to Delphi



Financial Group Inc., its subsidiary with stronger expertise in assetmanagement.



Year Income Gains Gains2012 1,104 … …2013 1,081 … …2014 1,317 74 …2015 1,647 5 …2016 1,633 80 -1

5-Yr Total 6,782 159 -1



Year (%) (%) (%) (%) (%) (%)2012 -30.3 2.2 2.2 2.2 -4.8 3.42013 -2.1 2.1 2.1 2.1 -7.8 3.02014 21.8 2.6 2.7 2.8 -1.5 2.92015 25.1 3.2 3.2 3.2 4.0 2.92016 -0.8 3.2 3.3 3.4 4.6 2.9

5-Yr Avg 0.7 2.7 2.7 2.7 -1.3 3.0





Current BCAR: 259.0



Year Income Gains Taxes Gains2012 557 … 240 …2013 909 … 304 …2014 1,508 74 411 …2015 1,694 5 434 …2016 1,758 80 446 -1

5-Yr Total 6,426 159 1,834 -1—————Source of Surplus Growth—————


Year Capital Changes PHS PHS2012 … 73 391 0.72013 … -300 305 0.62014 … -2,465 -1,294 -2.42015 … 2,265 3,530 6.82016 … -69 1,322 2.4

5-Yr Total … -496 4,254 1.6



Year-End Conditional AdjustedYear PHS Reserves PHS2012 52,716 … 52,7162013 53,020 6 53,0262014 51,727 2,256 53,9832015 55,257 17 55,2752016 56,579 27 56,606

LEVERAGE ANALYSIS

PeriodEnding


NPW toPHS

Res.to

PHSNetLev.

GrossLev.

NPW toPHS

Res.to

PHSNetLev.

GrossLev.

2012 … 0.0 0.2 1.6 0.5 1.8 2.8 3.42013 … 0.0 0.2 1.5 0.5 1.7 2.7 3.12014 … 0.0 0.3 0.7 0.6 1.6 2.7 3.22015 … 0.0 0.1 0.2 0.6 1.6 2.7 3.12016 … 0.0 0.1 0.2 0.5 1.5 2.6 3.0




PeriodEnding


CededReins. Total

Bus.Ret.(%)



Bus.Ret.(%)



2012 71,223 … 86.2 135.1 64.7 44.6 61.52013 65,261 … 78.1 123.1 74.6 36.4 43.32014 21,057 … 15.8 40.7 68.3 36.3 50.02015 4,402 … 6.1 8.0 69.3 32.8 45.62016 6,579 … 8.0 11.6 71.3 30.3 40.9


UnearnedPremiums

OtherRecov*

TotalReinsRecov

US Affiliates.................... 10,436 28,265 9,543 … 48,244Foreign Affiliates............. 14 197 217 … 428US Insurers ..................... 120 2,040 232 … 2,392Other Non-US................. … 1,680 19 … 1,699

Total (ex US Affils) ...... 134 3,917 468 … 4,519Grand Total.................... 10,570 32,182 10,011 … 52,763




CalendarYear

Orig.Loss

Reserves

DevelopedReserves

Thru LatestYear End

Develop.to

Orig. (%)

Develop.to

PHS (%)

Develop.to

NPE (%)


UnpaidRes. to

Develop. (%)2011 149 … -99.9 -0.3 … … …2012 … … … … … … …2013 … … … … … … …2014 … … … … … … …2015 … … … … … … …2016 … … … … … … …

LIQUIDITY ANALYSIS

PeriodEnding


QuickLiq. (%)

CurrentLiq. (%)

OverallLiq. (%)


QuickLiq. (%)

CurrentLiq. (%)

OverallLiq. (%)


2012 437.5 414.0 524.0 10.7 38.2 123.1 142.4 7.42013 335.5 398.4 518.7 9.6 36.6 125.9 144.8 7.52014 93.0 307.4 464.1 9.3 36.3 127.2 145.7 7.02015 257.3 725.8 870.0 2.7 37.2 128.5 147.2 7.12016 255.4 604.9 759.0 3.0 36.9 130.1 149.4 6.6


Cash Cash Cash Cash Cash Cash CashYear Flow Flow Flow Flow (%) Flow (%) Flow (%) Flow (%)2012 107 1,280 3,578 69.3 -99.9 88.2 105.72013 -2,053 -1,002 -3,723 -99.9 -63.4 103.7 115.92014 192 1,155 -1,337 121.9 188.5 120.1 124.12015 -1,129 226 -510 -99.9 124.1 114.1 125.92016 -1,079 283 3,129 -94.1 126.8 118.0 130.1

5-Yr Total -3,962 1,942 1,137 … … … …


PeriodEnding



Bonds

RealEstate/Mtg.

OtherInvestedAssets

CommonStocks

Non-Affil.Inv.Lev.

Affil.Inv.

Class3-6

BondsCommon

Stocks2012 … … … … … … 4.7 24.32013 … … … … … … 3.9 29.42014 … … … … … … 5.2 31.42015 … … … … … … 5.3 29.82016 0.3 … … … 0.3 … 5.8 29.7



Government 6.0 5.2 8.8 0.4 0.0 4Gov’t Agencies & Muni 1.1 5.3 21.4 4.4 9.2 11Industrial & Misc 2.5 18.2 16.6 … 0.8 5

Total 9.6 28.8 46.8 4.8 10.1 8



2016 2015 2014 2013 2012Bonds (000) 47,043 51,100 50,861 47,635 44,917US Government 20.4 18.8 22.7 74.9 100.0Foreign - All Other 1.1 1.0 0.2 … …State/Special Revenue - US 41.4 35.4 35.9 21.1 …Industrial & Misc - US 37.2 44.9 41.2 4.0 …

Public Issues 100.0 100.0 100.0 100.0 100.0



Other Inv Assets (000) 4,734 765 1,275 2,612 6,335Cash 82.3 100.0 100.0 100.0 3.7Short-Term … … … … 96.3All Other 17.7 … … … …

HISTORY

On February 11, 2004, TNUS Insurance Company was formed under thelaws of the State of New York as the vehicle for the domestication of theUnited States Branch of The Nichido Fire and Marine Insurance Company,Limited of Tokyo, Japan (Nichido Japan-USB). The domestication wasfinalized on July 1, 2004 as all assets and liabilities of Nichido Japan USBwere transferred to TNUS through a Domestication Agreement and Transferand Assumption Agreement.

Up to November 30, 2012 TNUS was a wholly owned subsidiary of TokioMarine & Nichido Fire Insurance Co., Ltd. (United States Branch)(TMNF-US). Effective that date, the common stock was transferred byTMNF to Tokio Marine North America, Inc. (TMNA). Effective December31, 2015, the common stock of the company was transferred by TMNA toTokio Marine America Insurance Company.

Paid in capital of $9,900,000 is comprised of 500,000 shares of commonstock at a par value of $10 per share and $4,900,000 of contributed surplus. Allauthorized shares are issued and outstanding.

MANAGEMENT

Day-to-day operations of the company are under the direction of a U.S basedmanagement team that receives support from Tokio Marine Management,Inc., a wholly owned subsidiary of Tokio Marine America InsuranceCompany.



REGULATORY


REINSURANCE





BALANCE SHEET


Bonds .............................................. 47,043 51,100 72.2 81.8Cash and short-term invest ................. 3,894 765 6.0 1.2Other non-affil inv asset ..................... 840 … 1.3 …

Total invested assets....................... 51,778 51,865 79.4 83.0Premium balances ............................. 9,982 8,626 15.3 13.8Accrued interest ................................ 339 367 0.5 0.6All other assets.................................. 3,097 1,595 4.8 2.6

Total assets................................... 65,195 62,454 100.0 100.0




Loss & LAE reserves .......................... 823 1,180 1.3 1.9Conditional reserve funds ................... 27 17 0.0 0.0All other liabilities ............................ 7,766 5,999 11.9 9.6






Operations 2016Premiums earned............ … Premiums collected......... -523

Losses incurred ............ …Benefit & loss-related pmts

584LAE incurred .............. -123Undrw expenses incurred

-9LAE & undrw expenses paid

-28

Net underwriting income 132 Undrw cash flow ............ -1,079Net investment income.... 1,633 Investment income.......... 1,863

Other income/expense ... -7 Other income/expense ... -7

Pre-tax oper income ... 1,758Pre-tax cash operations

778Realized capital gains...... 80Income taxes incurred ..... 446 Income taxes pd (recov)... 494

Net income................ 1,392 Net oper cash flow...... 283

—— ♦ ——


TRANS PACIFIC INSURANCE COMPANYAvenue1221 Avenue of the Americas, Suite 1500, New York, NY

10020-1001Web: www.tmamerica.com

Tel: 212-297-6600 Fax: 212-297-6062AMB#: 002882 NAIC#: 41238Ultimate Parent#: 058633 FEIN#: 13-3118700




RATING RATIONALE


Rating Rationale: The ratings for Tokio Marine and Nichido Fire InsuranceCompany, Limited (TMNF), reflect its strong risk-adjusted capitalization,track record of profitable operating performance and favorable businessprofile.







Best’sFSR

08/18/17 A++ 08/22/14 A++08/19/16 A++ 05/15/14 A++08/21/15 A++ 08/22/13 A++




PeriodEnding


NetPremiumsWritten

Pre-taxOperating

IncomeNet

Income

TotalAdmitted

Assets


2012 18,819 -52 -755 -461 65,748 48,4052013 23,365 -396 -223 -218 65,120 47,2112014 31,603 4 1,960 1,527 68,122 49,6482015 32,226 -3 2,006 1,472 72,986 51,5402016 32,748 0 974 1,081 70,963 52,693


PeriodEnding

Comb.Ratio

Inv.Yield(%)

Pre-taxROR(%)

NAInvLev

NPWto

PHSNetLev.

OverallLiq.(%)

Oper.Cash

flow (%)2012 -99.9 2.7 898.5 … … 0.3 386.1 108.62013 -99.9 2.3 52.8 … … 0.4 376.3 -85.62014 -99.9 2.4 999.9 … 0.0 0.4 369.6 5.12015 -99.9 2.3 999.9 … … 0.4 340.7 -99.92016 -99.9 2.2 -99.9 0.2 0.0 0.3 390.5 41.2

5-Yr … 2.4 -99.9 … … … … …

(*) Within several financial tables of this report, this company is compared against theWorkers’ Compensation Composite.


BUSINESS PROFILE

Trans Pacific Insurance Company was incorporated January 1982, underthe laws of the State of New York to act as a domestic property and casualtyinsurer. The company is licensed to write business in 46 states and the Districtof Columbia. Most of the company’s business is attributable to the workerscompensation line of business.

The company has three assumed excess of loss reinsurance agreements withan affiliate, Tokio Marine & Nichido Fire Insurance Co., Ltd. (CanadianBranch) (TMNF-CAD) - a non-marine property excess of loss agreement, amarine excess of loss agreement, and a non-marine second property per riskexcess of loss agreement. Balances under the assumed excess of lossagreements are retroceded to TMNF.

Effective June 1, 2012, the company entered in a general facultativeagreement with Tokio Marine Specialty Insurance Company (TMSIC)whereby the company will assume policies from TMSIC. Business assumedunder the general facultative agreement may be ceded to TMNF.


Tokio Marine & Nichido Fire Insurance Company, Ltd. (TMNF), is whollyowned by Tokio Marine Holdings, Inc., one of Japan’s largest insurancegroups. The group has more than 270 subsidiaries and affiliates that provide

primary life, non-life insurance and reinsurance as well as financial andgeneral types of business, including asset management, in the Japanese andoverseas markets. Established in 1879 as the first non-life insurance companyin Japan, TMNF has approximately one-quarter of the domestic market interms of net premiums written (NPW) at the end of December 2016.





PeriodEnding




2012 18,819 -1.1 3,516 95.5 22,388 9.62013 23,365 24.2 8,596 144.5 32,358 44.52014 31,603 35.3 8,465 -1.5 40,064 23.82015 32,226 2.0 3,590 -57.6 35,819 -10.62016 32,748 1.6 3,504 -2.4 36,252 1.2

5-Yr CAGR … 11.5 … 14.3 … 12.2

PeriodEnding

————NPW———— ————NPE————($000) (% Chg) ($000) (% Chg)

2012 -52 -99.9 -84 -99.92013 -396 -99.9 -423 -99.92014 4 100.9 10 102.32015 -3 -99.9 3 -67.92016 0 100.3 -2 -99.9

5-Yr CAGR … -88.5 … -99.9



Territory: The company is licensed in the District of Columbia, AL, AK, AZ,AR, CA, CO, CT, DE, FL, GA, HI, ID, IL, IN, IA, KS, KY, ME, MD, MA, MI,MN, MS, MO, MT, NE, NV, NJ, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD,TN, TX, UT, VA, WA, WV, WI and WY.


———DPW——— —Prem Assumed— —Prem Ceded—Product Line ($000) (%) ($000) (%) ($000) (%)Workers’ Comp 21,143 64.6 683 19.5 21,826 60.2Com’l MultiPeril 7,927 24.2 … … 7,927 21.9Oth Liab Occur 1,464 4.5 -1 0.0 1,463 4.0Comm’l Auto Liab 1,279 3.9 … … 1,279 3.5All Other 934 2.9 2,822 80.5 3,757 10.4

Total 32,748 100.0 3,504 100.0 36,252 100.0


Product Line ($000) (%) (%)Workers’ Comp 0 100.0 0.0Com’l MultiPeril … … …Oth Liab Occur … … …Comm’l Auto Liab … … …All Other … … …

Total 0 100.0 0.0

BY-LINE RESERVES ($000)Product Line 2016 2015 2014 2013 2012Workers’ Comp 8,136 8,883 10,518 11,952 12,271Com’l MultiPeril 45 81 122 346 411Comm’l Auto Liab 6 9 17 9 15Oth Liab Occur … 95 7 45 41All Other … -1 -1 19 39

Total 8,187 9,067 10,663 12,371 12,777


2016 2015 2014 2013 2012California 8,137 8,637 10,794 6,919 6,867New York 3,511 2,346 1,488 630 956Illinois 2,702 2,762 2,644 2,930 1,325Georgia 2,315 2,154 1,894 1,587 725New Jersey 1,948 1,198 1,250 394 424Texas 1,836 1,574 1,818 1,260 1,439Tennessee 1,510 1,433 1,549 1,271 1,078Florida 1,401 1,281 1,149 1,091 732Michigan 1,105 1,384 550 1,057 458Pennsylvania 1,054 934 787 845 613All Other 7,229 8,524 7,680 5,380 4,202

Total 32,748 32,226 31,603 23,365 18,819

RISK MANAGEMENT







Operating Results: TMNF reported a non-consolidated net profit of JPY 249billion in fiscal year 2016, compared to JPY 302 billion in fiscal year 2015.This reduction was mainly due to a strong decline in investment results, drivenby lower dividends received from its subsidiaries. Underwriting results, incontrast, materially improved from JPY 14 billion in fiscal year 2015 to JPY



116 billion in fiscal year 2016, primarily reflecting lower losses related tonatural catastrophes and lower provisions for catastrophe loss reserves.




Pre-tax After-taxPeriod Operating Operating Net TotalEnding Income Income Income Return2012 -755 -469 -461 -4612013 -223 -218 -218 -2182014 1,960 1,477 1,527 1,5272015 2,006 1,443 1,472 1,4722016 974 785 1,081 1,080

5-Yr Total 3,961 3,019 3,401 3,400

————Company———— ——Industry Composite——Period Pre-tax Return Operating Pre-tax Return OperatingEnding ROR (%) on PHS (%) Ratio (%) ROR (%) on PHS (%) Ratio (%)2012 898.5 -0.9 552.1 5.2 7.7 93.72013 52.8 -0.5 57.5 9.5 11.2 77.82014 999.9 3.2 -99.9 9.2 7.4 89.72015 999.9 2.9 -99.9 16.5 6.9 82.72016 -99.9 2.1 -99.9 17.1 10.7 81.9

5-Yr Avg -99.9 1.4 … 11.9 8.8 85.0






For fiscal year 2017, overall NPW growth (private insurance) is expected tobe 1.6%, chiefly driven by growth in auto insurance and liability insurance.The underwriting profit is expected to improve to JPY 130 billion, while theloss ratio (private insurance, E/I basis) is expected to remain stable at 57.8%. Itis anticipated that a decline in net incurred losses related to naturalcatastrophes will be offset by an increase in large losses, which were relativelylow in fiscal year 2016. The expense ratio is expected to remain relativelystable at 32.6% with expenses increasing in line with NPW growth. As aresult, expectations are that the combined ratio will remain unchanged at90.4% in fiscal year 2017.


PeriodEnding



Loss &LAE

NetComm.

OtherExp.

TotalExp.

Div.Pol.

Comb.Ratio

Comb.Ratio

2012 -2,185 999.9 -99.9 -99.9 999.9 -99.9 999.9 -99.9 -99.9 112.32013 -1,436 -69.1 -99.9 -99.9 999.9 -99.9 43.8 -41.9 -99.9 93.92014 722 -68.6 -99.9 -99.9 -99.9 999.9 -99.9 83.0 -99.9 103.82015 896 -99.9 -99.9 -99.9 999.9 -99.9 587.2 505.2 -99.9 96.82016 -273 -99.9 999.9 -99.9 -99.9 999.9 -99.9 -99.9 -99.9 95.7

5-Yr Total/Avg -2,276 40.1 -99.9 … 999.9 -99.9 … -98.8 … 100.1

BY-LINE LOSS RATIOProduct Line 2016 2015 2014 2013 2012 5-Yr AvgWorkers’ Comp -99.9 -99.9 -58.4 -70.1 999.9 34.2All Other … … … … 999.9 999.9

Total -99.9 -99.9 -68.6 -69.1 999.9 40.1


California 37.6 35.7 101.9 79.0 68.4 64.1New York 88.6 107.9 153.2 101.9 47.9 100.4Illinois 119.7 109.6 89.8 123.1 58.2 103.3Georgia 72.7 61.0 -16.1 141.5 33.7 61.1New Jersey 93.6 198.1 64.9 -19.9 -5.8 92.8Texas 52.1 -3.1 -22.1 148.0 113.4 51.6Tennessee 133.4 68.1 26.3 111.4 116.3 88.0Florida 102.6 362.4 20.7 91.0 111.0 141.5Michigan 153.9 55.7 -7.8 117.0 36.0 81.7Pennsylvania 30.7 50.4 -6.5 119.6 88.0 53.4All Other 74.5 133.4 37.3 100.4 47.7 82.7

Total 75.4 92.5 59.2 102.1 66.2 78.7

Investment Results: Non-consolidated net investment income decreased byJPY 154 billion in fiscal year 2016 to JPY 218 billion. This reduction wasmainly driven by lower dividend income from its subsidiaries in comparison to



the amount received in fiscal year 2015, where TMNF received extradividends from subsidiaries to support the acquisition of HCC InsuranceHoldings, Inc. Net capital gains declined from JPY 116 billion in fiscal year2015 to JPY 88 billion in fiscal year 2016, reflecting lower gains on sales offoreign securities.


Net investment yield (including capital gains) declined from 4.4% in fiscalyear 2015 to 2.6% in fiscal year 2016, falling behind the five-year average netinvestment yield of 2.9%. To support its investment income, TMNF has takeninitiatives such as outsourcing a portion of its invested assets to DelphiFinancial Group Inc., its subsidiary with stronger expertise in assetmanagement.



Year Income Gains Gains2012 1,454 8 …2013 1,244 0 …2014 1,278 50 …2015 1,249 29 …2016 1,243 296 -1

5-Yr Total 6,468 383 -1



Year (%) (%) (%) (%) (%) (%)2012 -6.0 2.7 2.7 2.7 -4.8 3.42013 -14.4 2.3 2.3 2.3 -7.8 3.02014 2.7 2.4 2.5 2.5 -1.5 2.92015 -2.2 2.3 2.3 2.4 4.0 2.92016 -0.5 2.2 2.8 3.0 4.6 2.9

5-Yr Avg -4.5 2.4 2.5 2.6 -1.3 3.0





Current BCAR: 259.0



Year Income Gains Taxes Gains2012 -755 8 -287 …2013 -223 0 -6 …2014 1,960 50 483 …2015 2,006 29 563 …2016 974 296 189 -1

5-Yr Total 3,961 383 943 -1—————Source of Surplus Growth—————


Year Capital Changes PHS PHS2012 … -217 -677 -1.42013 … -976 -1,194 -2.52014 … 909 2,437 5.22015 … 420 1,892 3.82016 … 74 1,154 2.2

5-Yr Total … 210 3,611 1.4



Year-End Conditional AdjustedYear PHS Reserves PHS2012 48,405 316 48,7222013 47,211 604 47,8152014 49,648 41 49,6892015 51,540 26 51,5662016 52,693 100 52,793



LEVERAGE ANALYSIS

PeriodEnding


NPW toPHS

Res.to

PHSNetLev.

GrossLev.

NPW toPHS

Res.to

PHSNetLev.

GrossLev.

2012 … 0.3 0.3 0.5 0.5 1.8 2.8 3.42013 … 0.3 0.4 0.8 0.5 1.7 2.7 3.12014 0.0 0.2 0.4 0.8 0.6 1.6 2.7 3.22015 … 0.2 0.4 0.8 0.6 1.6 2.7 3.12016 0.0 0.2 0.3 0.8 0.5 1.5 2.6 3.0


PeriodEnding


CededReins. Total

Bus.Ret.(%)



Bus.Ret.(%)



2012 8,844 -0.3 8.7 18.3 64.7 44.6 61.52013 18,851 -1.7 19.5 39.9 74.6 36.4 43.32014 23,225 0.0 24.5 46.8 68.3 36.3 50.02015 20,755 0.0 27.5 40.3 69.3 32.8 45.62016 23,639 0.0 32.9 44.9 71.3 30.3 40.9


UnearnedPremiums

OtherRecov*

TotalReinsRecov

US Affiliates.................... 24,192 72,642 13,677 … 110,511Foreign Affiliates............. 61 6,298 88 … 6,447US Insurers ..................... 651 5,207 570 … 6,428Other Non-US................. 380 4,097 … … 4,477

Total (ex US Affils) ...... 1,092 15,602 658 … 17,352Grand Total.................... 25,284 88,244 14,335 … 127,863




CalendarYear

Orig.Loss

Reserves

DevelopedReserves

Thru LatestYear End

Develop.to

Orig. (%)

Develop.to

PHS (%)

Develop.to

NPE (%)


UnpaidRes. to

Develop. (%)2011 6,606 6,363 -3.7 -0.5 999.9 4,935 77.62012 5,105 6,007 17.7 1.9 … 4,935 82.22013 5,133 5,722 11.5 1.2 … 4,935 86.22014 4,800 5,408 12.7 1.2 999.9 4,935 91.32015 4,227 5,095 20.5 1.7 999.9 4,935 96.92016 4,935 4,935 … … … 4,935 100.0


AccidentYear

Orig.Loss

Reserves

DevelopedReserves

Thru LatestYear End

Develop.to

Orig. (%)


Acc. YrLoss

Ratio

Acc. YrComb.Ratio

2011 … … … … 425.6 146.52012 1 … -99.9 … -99.9 941.12013 … … … … -99.9 -99.92014 … … … … … -99.92015 … … … … … 999.92016 … … … … … -99.9

LIQUIDITY ANALYSIS

PeriodEnding


QuickLiq. (%)

CurrentLiq. (%)

OverallLiq. (%)


QuickLiq. (%)

CurrentLiq. (%)

OverallLiq. (%)


2012 343.2 319.3 386.1 5.0 38.2 123.1 142.4 7.42013 220.1 305.7 376.3 5.1 36.6 125.9 144.8 7.52014 97.7 286.7 369.6 5.2 36.3 127.2 145.7 7.02015 102.8 266.4 340.7 5.7 37.2 128.5 147.2 7.12016 154.7 307.9 390.5 4.1 36.9 130.1 149.4 6.6


Cash Cash Cash Cash Cash Cash CashYear Flow Flow Flow Flow (%) Flow (%) Flow (%) Flow (%)2012 -899 82 8,347 -99.9 108.6 88.2 105.72013 -4,115 -2,653 -4,957 -99.9 -85.6 103.7 115.92014 -3,592 -2,295 -3,907 -56.9 5.1 120.1 124.12015 5,465 6,376 7,541 -44.2 -99.9 114.1 125.92016 -2,681 -2,053 1,217 -4.1 41.2 118.0 130.1

5-Yr Total -5,822 -543 8,241 … … … …




PeriodEnding



Bonds

RealEstate/Mtg.

OtherInvestedAssets

CommonStocks

Non-Affil.Inv.Lev.

Affil.Inv.

Class3-6

BondsCommon

Stocks2012 … … … … … … 4.7 24.32013 … … … … … … 3.9 29.42014 … … … … … … 5.2 31.42015 … … … … … … 5.3 29.82016 0.2 … … … 0.2 … 5.8 29.7



Government 5.6 13.4 1.5 0.1 … 3Gov’t Agencies & Muni 2.4 9.5 23.9 3.0 3.5 8Industrial & Misc 0.2 22.8 11.6 2.1 0.5 5

Total 8.3 45.7 37.0 5.1 4.0 62016 2015 2014 2013 2012

Bonds (000) 45,437 47,521 50,865 48,784 44,501US Government 20.6 16.6 23.0 59.3 100.0Foreign - All Other 4.4 6.1 2.1 0.6 …State/Special Revenue - US 42.2 40.4 44.2 31.7 …Industrial & Misc - US 32.8 36.9 30.7 8.4 …

Public Issues 100.0 100.0 100.0 100.0 100.0



Other Inv Assets (000) 10,464 9,247 1,706 5,614 10,570Cash 100.0 100.0 100.0 100.0 18.8Short-Term … … … … 81.2

HISTORY

The company was incorporated on January 21, 1982, under the laws of NewYork and commenced business the same day.

Effective September 30, 2012, the common stock of the company wastransferred by Tokio Marine & Nichido Fire Insurance Co., Ltd. (United StatesBranch) (TMNF-US) to Tokio Marine & Nichido Fire Insurance Co., Ltd.,

Tokyo, Japan (TMNF). Effective November 30, 2012, the common stock ofthe company was transferred by TMNF to Tokio Marine North America, Inc.(TMNA). Effective December 31, 2015, the common stock of the companywas transferred by TMNA to Tokio Marine America Insurance Company(TMAIC).

Paid-in capital of $27,000,000 is comprised of 50,000 shares of commonstock at a par value of $100 per share and $22,000,000 of contributed surplus.All authorized shares are issued and outstanding.

MANAGEMENT

Day-to-day operations of the company are under the direction of a U.S basedmanagement team that receives support from Tokio Marine Management,Inc., a wholly owned subsidiary of Tokio Marine America InsuranceCompany.



REGULATORY


REINSURANCE







BALANCE SHEET


Bonds .............................................. 45,437 47,521 64.0 65.1Cash and short-term invest ................. 10,464 9,247 14.7 12.7

Total invested assets....................... 55,901 56,768 78.8 77.8Premium balances ............................. 11,498 12,439 16.2 17.0Accrued interest ................................ 343 355 0.5 0.5All other assets.................................. 3,221 3,424 4.5 4.7

Total assets................................... 70,963 72,986 100.0 100.0


Loss & LAE reserves .......................... 8,187 9,067 11.5 12.4Conditional reserve funds ................... 100 26 0.1 0.0All other liabilities ............................ 9,983 12,354 14.1 16.9






Operations 2016Premiums earned............ -2 Premiums collected......... -105

Losses incurred ............ 851Benefit & loss-related pmts

2,612LAE incurred .............. -604Undrw expenses incurred

-17LAE & undrw expenses paid

-77Div to policyholders ..... 41 Div to policyholders ..... 41

Net underwriting income -273 Undrw cash flow ............ -2,681Net investment income.... 1,243 Investment income.......... 1,542

Other income/expense ... 4 Other income/expense ... -673

Pre-tax oper income ... 974Pre-tax cash operations

-1,813Realized capital gains...... 296Income taxes incurred ..... 189 Income taxes pd (recov)... 240

Net income................ 1,081 Net oper cash flow...... -2,053





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