AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings 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. (TRE) (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 its consolidated risk-adjusted capitalisation that is at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR), as well as its high quality of capital. While the elevated reserve position at TRA continues to present some uncertainty to the group's balance sheet strength due to ongoing social and economic inflation pressures, the impact has moderated compared with previous years.
Toa Re delivered a notable improvement in net profits in fiscal-year (FY) 2024, with reported net income rising to JPY 28.5 billion from JPY 15.6 billion in FY2023. The profit enhancement was driven by strengthened underwriting performance, reflecting reduced natural catastrophe losses and the benefits of a disciplined underwriting approach and multi-year portfolio re-positioning efforts, alongside increased investment returns from higher interest and dividend income. While TRA continues to face pressure from ongoing reserve strengthening, its underwriting performance showed improvement with a lower combined ratio and narrowing underwriting loss in FY2024.
Toa Re maintains its unique position as the sole domestic commercial reinsurer in Japan, operating with a strategically important market presence and long-standing relationships with the country's insurers. The group upholds a diversified underwriting portfolio across product lines and geographic markets. It has established a sizeable international presence through its subsidiaries, TRA and TRE, which provides meaningful premium diversification and supports the group's strategic expansion. In terms of product mix, approximately 33% of the group's total net premium written is derived from its life reinsurance portfolio, enhancing overall portfolio stability through low correlation with catastrophe-exposed non-life business lines.
Negative rating actions could occur if the improvements in Toa Re's underwriting performance from current measures prove to be unsustainable, leading to a resurgence of a negative operating performance trend. Negative rating actions also could occur if there is material deterioration in the group's risk-adjusted capitalisation or absolute capital size caused by severe underwriting losses or further material adverse development in reserving practice. Positive rating actions could occur if the group demonstrates a consistent and sustainable enhancement in its operating performance exceeding industry average; however, the likelihood of such actions remains limited at this time.
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 Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings Assessments
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