AM Best


A.M. Best Affirms Ratings of The Toa Reinsurance Company Limited and The Toa Reinsurance Company of America


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Mariza Costa
Senior Financial Analyst
+(1) (908) 439 2200, ext. 5308
mariza.costa@ambest.com

Seewon Oh
Senior Financial Analyst
+852-2827-3404
seewon.oh@ambest.com


Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

HONG KONG - JUNE 11, 2014 04:10 PM (EDT)
A.M. Best has affirmed the financial strength rating of A+ (Superior) and issuer credit ratings of "aa-" of The Toa Reinsurance Company Limited (Toa Re) (Japan) and its subsidiary, The Toa Reinsurance Company of America (TRA) (headquartered in Morristown, NJ). The outlook for all ratings is stable.

The ratings reflect Toa Re's solid risk-adjusted capitalization, improved underwriting results, driven by tightened underwriting criteria and its strong market presence in Japan. Toa Re maintains solid risk-based capitalization that is supportive of the company's risk appetite and enhanced by its adequate operating performance. The company has continued to tightly manage underwriting guidance, based on its risk analysis, as the company is putting an emphasis on profitability over revenue growth, as evidenced by reduced catastrophic exposure since the 2011 events.

As a sole domestic reinsurance company in Japan, Toa Re has established long-standing relationships with major ceding companies in Japan, as well as insurance/reinsurance companies in the Asia-Pacific region, which enables the company to secure stable growth in its business amid softening market conditions.

Offsetting rating factors are volatility in Toa Re's operating performance, changes in buying behavior by large clients and increasingly competitive reinsurance market conditions. The company reported high volatility in earnings and capitalization in the past five years because of the large catastrophe losses and relatively high exposure to equity investments. The major ceding companies in Japan have increased their retentions as they have each experienced improvement in their capitalization, and have consolidated their reinsurance programs, a result of merger activity among themselves.

Toa Re is well positioned at its current rating level. Downward pressure could arise if there is a material decrease in capitalization due to a significant deterioration in underwriting performance caused by large size catastrophe event.

The ratings of U.S.-based TRA are aligned with Toa Re, reflecting the company's strategic importance as an operating subsidiary of Toa Re. TRA has a well-established position within the U.S. regional markets, a strong risk-adjusted capital position, a diversified book of business, and a continued focus on underwriting performance. The U.S. operation has grown to represent a substantial portion of premiums and operating income for the organization as it provides Toa Re the opportunity for strategic international expansion and portfolio diversification. At the same time, TRA benefits from the global presence and financial strength of Toa Re.

The methodology used in determining these interactive ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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

This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.


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