A.M. Best Affirms Ratings of The Toa Reinsurance Company, Limited and The Toa Reinsurance Company of America

OLDWICK, N.J., U.S.A.--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit rating (ICR) of “aa-” of The Toa Reinsurance Company, Limited (Toa Re) (Japan). The outlook for both ratings is stable.

Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and the ICR of “a” of The Toa Reinsurance Company of America (TRA) (headquartered in Morristown, NJ). The outlook for both ratings is stable.

These rating actions reflect Toa Re’s superior capitalization, excellent underwriting performance in the recent two years and established market presence in Japan.

Toa Re’s superior risk-adjusted capitalization is reflective of its Best’s Capital Adequacy Ratio (BCAR) and low underwriting leverage. The company also strengthened its BCAR ratio over the past two years by disposing of its listed equity. The domestic equity investment decreased to 28.9% of total assets as of fiscal year 2007 from 41.8% as of fiscal year 2004.

Toa Re improved its business portfolio by reducing participation in the competitive motor business while increasing quality lines of business (e.g., life business). The combined ratios in fiscal year 2006 and fiscal year 2007 stood at 85.1% and 89.8%, respectively. The low combined ratio was attributed to the lack of a major catastrophe event in Japan and to the improved underwriting results over the past two years.

Offsetting these positive factors is the relatively high concentration of equity risk. Although Toa Re recorded an excellent operating result, its adjusted capital and surplus decreased by 8% to JPY 260 billion in fiscal year 2007. The decrease was due to a drop in unrealized capital gains resulting from the downward trend in the Japanese stock market in fiscal year 2007.

The rating affirmation of TRA reflects its continued improvement in underwriting performance in 2007 and the first half of 2008, superior risk-adjusted capital position and being a strategic diversification vehicle and profitable investment to Toa Re. A partially offsetting factor is a modest increase in the expense ratio resulting from lower premium volume.

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Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.