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 reflects its modest capital base, low underwriting leverage and conservative investment portfolio. The company’s recent initiative to strengthen reserves, which was partially in response to the adverse loss development from one of two cells in its segregated account during fiscal-year 2018, caters additional provision for its losses based on its conservative reserving approach. Despite the increase in reserves, the capital required to support its current book of business is still relatively modest, given the volume of risks that NEWGT currently underwrites and retains.
Operating performance continued to improve this year with a lower combined ratio, underpinned by an improvement in claims experience and a stable expense ratio. Although revenue is expected to decrease slightly in the short term over the course of its portfolio enhancement, AM Best believes the company’s underwriting results will remain profitable and gradually improve through the pursuit of growth in group-related business.
As a single-parent captive, NEWGT mainly insures and reinsures risks from affiliated and related companies of ITOCHU Corporation (ITOCHU), which is one of Japan’s largest trading companies. NEWGT also maintains a segregated account that writes third-party lines of businesses, which are well-spread and less volatile. The current book of business consists of risks that may expose the company to high-severity and low-frequency losses. However, the company has managed these risks through prudent underwriting guidelines and an appropriate reinsurance program.
The stable outlooks reflect AM Best’s expectation that NEWGT’s operating performance will improve gradually and remain profitable though its strong loss ratio controls and continuous portfolio enhancement.
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 in the United States and 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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