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The sale by TMHD comes as reinsurance markets continue to be soft.
The sale of the reinsurance business is also in line with TMHD's strategy to focus on primary insurance, especially more-profitable and less catastrophe-related risks, such as specialty insurance, in developed countries as well as emerging markets.
Fitch expects the deal to reduce TMHD's total risk amount, including cutting catastrophe risks relative its available capital.
Further, the sale of TMHD's reinsurance business follows the company's strategy to focus on primary insurance, "especially more-profitable and less catastrophe-related risks, such as specialty insurance, in developed countries as well as emerging markets," explained Fitch.
Fitch noted that TMHD has spent the last decade developing "a high-quality primary insurance business franchise outside Japan - especially in the United States - and as a result, the contribution of reinsurance to the group's profit from international operations has fallen to below 10 percent from about 50 percent over that time."
The deal is likely to cut TMHD's total risk amount, including catastrophe risks relative to its available capital, added Fitch.
"It will also allow TMHD to focus on the more stable and more profitable primary insurance business, especially specialty insurance, which requires high-quality underwriting expertise," said the ratings agency, which also expects TMHD's earnings to be less volatile after the deal.
TMHD's capital adequacy metrics remained very strong.
Additionally, the company said that on Monday it received a notification from the US Federal Trade Commission granting an early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, between Delphi and TMHD.
TMHD is steadily strengthening its overseas insurance underwriting operations, and the company estimates that its overseas insurance premiums and business unit profits will be about 38% and 28%, respectively, of its totals in the financial year ending 31 March 2018 (FYE18).
Furthermore, TMHD's domestic life insurance business is expanding strongly, with the annual premiums in force of the profitable third (health) sector increasing by 6% in April-December 2017, which should help to support TMHD's credit profile.
Fitch views TMHD's catastrophe risk management as much more sophisticated than the other two major Japanese non-life groups.
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- TMi (Too Much Information)