HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of NEWGT Reinsurance Company, Ltd. (NEWGT) (Bermuda). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect NEWGT’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
NEWGT’s strong balance sheet assessment mainly reflects its modest capital size, low underwriting leverage and conservative investment portfolio. Given the volume of risks that the company currently writes and retains, the capital required to support its current book of business is relatively modest.
In response to the rising loss ratios from 2015 to 2017, NEWGT has exited a number of less profitable treaties and implemented various measures to remediate the performance of its underwriting portfolio. Despite a reduced revenue base following these remedial actions, underwriting results started to improve in 2018, supported by both a reduction in loss ratio and a stable expense ratio. AM Best believes that as NEWGT continues to focus on strong loss ratio control for its existing business and pursue profitable growth of its group-related business, its underwriting results will remain positive and gradually improve over time.
NEWGT is a wholly owned subsidiary of ITOCHU Corporation (ITOCHU), which is one of the largest trading companies in Japan. For its general account, NEWGT acts as a single-parent captive of ITOCHU, which insures and reinsures the risks of affiliated and related companies within the ITOCHU group. In addition, benefiting from ITOCHU’s broad business networks within Japan and overseas, the company is able to write some third-party risks under a segregated account, consisting of well-spread and less volatile lines, such as motorcycle, personal accident and residential fire insurance. Some risks in its current book of business exposes the company’s performance to high-severity, low-frequency losses. Nevertheless, NEWGT has managed this risk through prudent underwriting guidelines and an appropriate reinsurance program that aims to reduce the potential for volatility in its underwriting performance.
The stable outlooks reflect AM Best’s expectation that NEWGT’s operating performance will remain profitable, underpinned mainly by continued improvement in claims experience and an expense ratio that should remain stable over time.
Negative rating actions could occur if NEWGT’s risk-adjusted capitalization declines significantly, or if there is material deterioration in its operating performance. Negative rating actions also could arise from a material deterioration in ITOCHU’s credit rating profile.
AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
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