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 (Toa Re). The affirmations also apply to its subsidiaries, The Toa Reinsurance Company of America (TRA), and The Toa 21st Century Reinsurance Company (TRE), with the outlook of these credit ratings being ‘stable’. The agency says these ratings reflect Toa Re’s balance sheet strength, which AM Best assessed as strongest, in addition to its adequate operating performance, favourable business profile, and its appropriate risk management. AM Best says the balance sheet strength assessment is reflective of Toa Re’s consolidated risk-adjusted capitalisation, which AM Best’s capital adequacy ratio measures as being at the “strongest level” in conjunction with its high quality of capital. Despite TRA’s ongoing social and economic inflation pressures contributing to uncertainty surrounding the group’s balance sheet strength, the issue has eased compared to previous years. The agency highlights “notable improvement in net profits” with reported net income rising from 15.6 billion Japanese yen (US$105.91 million) in 2023 to JPY 28.5 billion in 2024, which AM Best attributes to a strengthened underwriting performance, fewer natural catastrophe losses, a shrewd underwriting approach, and an increase in investment returns from higher interest and dividends. The agency highlights the potential for negative rating actions if the improvements in Toa Re’s underwriting performance prove unsustainable, or if the group’s risk-adjusted capitalisation or absolute capital size weakens due to severe underwriting losses. AM Best adds that positive ratings could occur if the group demonstrates consistent, sustainable enhancements exceeding the industry standard average operating performance, although the agency states the likelihood of this is limited.
