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 these 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 assessment reflects consolidated risk-adjusted capitalisation that is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as high financial flexibility and high quality of capital. The company’s elevated reserve position from Toa Reinsurance Company of America’s (TRA) reserve strengthening exercise continues to be the major offsetting factor in Toa Re’s balance sheet strength assessment.
Toa Re’s adequate operating performance is underpinned by a five-year average return on equity of 1.7% (fiscal years 2017–2021), as calculated based on comprehensive income. The company’s net premium written (NPW) grew by 5% in fiscal year 2021, driven by its overseas business. Its overall underwriting performance was adversely impacted by a series of losses from natural catastrophes and extraordinary incidents in fiscal year 2021. The company’s combined ratio remained above 100% due to continued reserve strengthening from TRA and losses from the high frequency of natural catastrophes and large loss incidents.
Toa Re continues to be the sole domestic commercial reinsurer in Japan with a strong market position and a stable market share in the non-life proportional treaty segment. The company has a diversified underwriting portfolio in terms of both product and geography. During fiscal year 2021, the company’s overseas portfolio contributed approximately 60% of its total NPW. Toa Re’s life portfolio provides premium diversification and helps to stabilize the overall portfolio profits.
Negative rating actions could occur if there is material deterioration in risk-adjusted capitalisation or absolute capital size caused by severe underwriting losses or further adverse development in reserving practice. Negative rating actions could also occur if the group exhibits a significant deterioration in its operating performance, including operating profitability and losses from large-scale natural catastrophes.
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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