Rating Action on Nissan Global - Analyst Blog


On Sep 24, the financial strength rating (FSR) and issuer credit rating (ICR) of Nissan Global Reinsurance, Ltd., a single-parent captive of Nissan Motor Co. Ltd. ( NSANY ), was affirmed at "A-" and "a-", respectively, by A.M. Best Co. The rating agency assigned a stable outlook for both the ratings.

The rating affirmations were based on Nissan Global's strong track record of profitability since inception, sturdy capital position, and conservative approach to business, partly offset by risks related to exposure to product liability, property and marine cargo claims. Additionally, the company's strategic role as part of Nissan Motor, and the positive impact of the parent company's risk management and loss control programs, also supported the ratings.

Nissan Global has ample funds at its disposal and gets significant support from Nissan Motor. Moreover, the company has low underwriting risk due to its strategy of maintaining a low leverage level. However, the large size of its individual coverage leads to high gross exposures per loss occurrence.

As A.M. Best has affirmed the ratings after accounting for Nissan Global's operating and financial strength, it does not expect any rating upgrade or outlook revision before 1-2 years. However, the rating agency can revise the ratings downward or change the outlook on the ratings following several factors. These include a significant decline in operating results, erosion in capital base due to insured losses, fall in Best's Capital Adequacy Ratio (BCAR), and major changes in the management team and risk management controls and tolerances.

Nissan Motor currently carries a Zacks Rank #1 (Strong Buy). Other outperformers in the foreign automobile sector that are worth considering are Volkswagen AG ( VLKAY ), Honda Motor Co., Ltd. ( HMC ) and Fuji Heavy Industries Ltd. ( FUJHY ). Fuji and Volkswagen carry a Zacks Rank #1 (Strong Buy), while Honda Motor carries a Zacks Rank #2 (Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: BCAR , FUJHY , HMC , NSANY , VLKAY

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