AM Best Affirms Credit Ratings of The Toa Reinsurance Company, Limited and Its Subsidiaries

HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” (Excellent) of The Toa Reinsurance Company, Limited (Toa Re) (Japan), and its subsidiaries, The Toa Reinsurance Company of America (TRA) (Wilmington, Delaware, USA) and The Toa 21st Century Reinsurance Company, Ltd. (Switzerland). The outlook of the Credit Ratings (ratings) is stable.

The ratings reflect Toa Re’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management.

Toa Re’s balance sheet strength is underpinned by consolidated risk-adjusted capitalisation that is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as strong financial flexibility and liquidity and high quality of capital. Despite continued reserve strengthening from TRA due to social inflation in U.S. casualty insurance lines of business, the company’s risk-adjusted capitalisation is considered sufficient to absorb additional reserving risks.

Toa Re’s adequate operating performance is demonstrated by a five-year weighted average return-on-equity ratio of 2.3% (fiscal years 2016-2020), as calculated by AM Best. The company’s net premiums written increased by 6% during fiscal year 2020, driven mainly by the growth in the top line of its overseas non-life business. Overall underwriting performance improved in the absence of major natural catastrophe losses; however, Toa Re’s combined ratio remained above 100% in fiscal year 2020 due to TRA’s high loss ratio as a result of reserve strengthening, non-recurring losses from COVID-19 and an increased frequency in large non-catastrophe loss events.

Toa Re is the sole domestic commercial reinsurer in Japan with a strong presence and a stable market share in the non-life proportional treaty segment. The company’s underwriting portfolio is considered diversified by geography and product. During fiscal year 2020, the company’s two major overseas subsidiaries accounted for more than 25% of total written premium and made major contributions to Toa Re’s consolidated top line growth. In addition, Toa Re’s life business remains a major premium diversifier and profit stabiliser to the company’s overall portfolio.

Negative rating actions could occur if the company exhibits a significant deterioration its operating profitability. Negative rating actions also could occur if there is significant deterioration in Toa Re’s risk-adjusted capitalisation or absolute capital size due to severe underwriting losses or further adverse development in reserving practice.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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