NEWGT Reinsurance Company has had its financial strength rating of A- (Excellent) and the long-term issuer credit rating “a-” affirmed by A.M. Best.
NEWGT is a wholly-owned single-parent captive of ITOCHU Corporation, one of the largest trading companies in Japan.
The ratings are reflective of NEWGT’s “strong” balance sheet, in addition to its adequate operating performance, neutral business profile, and appropriate enterprise risk management.
The strong balance sheet assessment primarily reflects its modest capital size, low underwriting leverage, and conservative investment portfolio.
Given the volume of risk currently written and retained by the captive, the capital required to support its current book of business is relatively modest.
NEWGT exited a number of less profitable treaties and implemented various measures to remediate the performance of its underwriting portfolio, as a reaction to the rising loss ratios from 2015 to 2017.
Despite a reduced revenue base following these remedial actions, underwriting results started to improve this year, supported by a reduction in loss ratio and a stable expense ratio.
According to the ratings agency, as NEWGT continues to focus on strong loss ratio control for its existing business and pursue profitable growth of its group-related business, its underwriting results will “remain positive and gradually improve over time”.
The captive benefits from ITOCHU’s broad business networks within Japan and overseas and is able to write some third-party risks under a segregated account, consisting of well-spread and less volatile lines.
Some of the risks in NEWGT’s current book of business exposes its performance to high-severity, low-frequency losses, however, the captive has managed this risk through prudent underwriting guidelines and an appropriate reinsurance programme that aims to reduce the potential for volatility in its underwriting performance.
The outlook of these ratings is stable, which reflects A.M. Best’s expectation that NEWGT’s operating performance will remain profitable, underpinned mainly by continued improvement in claims experience and an expense ratio that should remain over time.
A significant decline in the captive’s risk-adjusted capitalisation, a material deterioration in the captive’s operating performance, or a material deterioration in ITOCHU’s credit rating profile could lead to negative rating actions.