HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a+” of The Toa Reinsurance Company, Limited (Toa Re) (Japan) and its subsidiary, The Toa Reinsurance Company of America (TRA) (headquartered in Morristown, NJ). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Toa Re’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Toa Re maintains the strongest level of risk-adjusted capitalization, owing to conservative risk management in its underwriting and investment strategies. Over the past five years, the company has worked to improve its capitalization by improving profitability and stabilizing results, which allowed the company to redeem JPY 30 billion of subordinated debt in July 2017. In addition, A.M. Best believes company benefits from the financial flexibility of being owned by large financial institutions and primary insurers in Japan.
The company has tightened controls in its catastrophe risk exposure and diversified its underwriting risks by expanding in the life and health reinsurance segments and in overseas markets. Approximately one-fifth of the book, in terms of net premium written, is generated by overseas subsidiaries. In regards to operating performance, despite a series of catastrophe events in North America in 2017, the company delivered profitable underwriting results in fiscal year 2017.
Offsetting rating factors include weak growth in Japan’s insurance market and abundant capacity in the global reinsurance market, which will pressure the company’s growth and profitability.
The ratings of U.S.-based TRA are aligned with its ultimate parent, Toa Re, and reflect TRA’s strategic importance as an operating subsidiary of Toa Re. TRA remains well-positioned in the U.S. regional markets. It maintains a solid customer base, has a strong risk-adjusted capital position, a well-diversified book of business and remains focused on underwriting performance. The U.S. operation has grown to represent a significant portion of premiums and income for the organization, and also provides Toa Re with an opportunity for a strategic international presence and portfolio diversification. At the same time, TRA benefits from Toa Re’s global presence and financial strength.
Negative rating actions could occur if there is substantial decline in risk-adjusted capitalization resulting from significant underwriting losses or adverse movements in the financial markets.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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