AM Best affirms NEWGT ratings
AM Best has affirmed the financial strength rating of A- and the long-term issuer credit rating of “a-” of NEWGT Reinsurance Company. The outlook of these ratings is stable.
The rating agency said that the affirmations reflect NEWGT’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
NEWGT’s balance sheet strength is well-supported by its risk-adjusted capitalisation, which is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital base, albeit reduced following a sizeable dividend upstream to its parent, ITOCHU Corporation, in the fiscal year ended 31 March 2023, is expected to remain sufficient to support its underwriting portfolio over the medium term. The company has a moderate level of reinsurance dependency; however, its exposure to potential credit risk is partially mitigated by a high-quality and well-diversified reinsurance panel.
“NEWGT’s operating performance has been consistently positive during the most recent five-year period,” said AM Best. “For the fiscal year ended 31 March 2023, the company recorded notable growth in both premium income and net profit. This was a result of a strong performance in ITOCHU's trading business, which was attributable to higher commodity prices and foreign exchange benefits from the depreciation of the Japanese yen during that period. Notwithstanding the moderate volatility in the major lines of marine cargo business due to the impact of commodity price fluctuations, AM Best expects that NEWGT’s operating performance will remain profitable over the intermediate term given the company’s prudent underwriting practices and reinsurance programmes.”
As a wholly owned subsidiary and captive insurer of ITOCHU, one of Japan’s largest general trading companies, NEWGT provides reinsurance protection against group-related risks across various regions. A majority of NEWGT’s business comes from ITOCHU-related marine business, and the remaining portfolio consists of a diverse mix of non-life business lines, including theft insurance, renters’ insurance, and group personal accident. NEWGT is well-integrated within the group with respect to risk management, corporate governance and internal control systems.
However, AM Best said that negative rating actions could occur if NEWGT’s risk-adjusted capitalisation significantly deteriorates, such as from heightened underwriting risk or an excessive dividend payout to its parent. Negative rating actions could also arise if there is significant deterioration in ITOCHU’s credit profile, including its operating profitability, financial leverage and interest coverage levels. Positive rating actions could occur if NEWGT demonstrates sustained and notable improvement in its underwriting and operating profitability for a period of time, while maintaining a robust level of risk-adjusted capitalisation.