Standard & Poor's Rating Services has raised the financial strength rating of Bermuda-based Tokio Millennium Re Limited to AA from AA-.

Meanwhile, A.M. Best has affirmed Tokio's financial strength rating of A+ (superior) and the issuer credit rating of 'aa-".

S&P noted that Tokio was highly likely to maintain strong credit quality, underpinned by its very strong financial profiles or support from its affiliated groups.

"We welcome this upgrade as a re-affirmation of Tokio Millennium Re Ltd.'s financial strength and commitment to the marketplace," said president and chief executive officer Tatsuhiko Hoshina.

"The second phase of Tokio Millennium Re's existence, writing a broader book of business at a wider range of layers, is well under way. We have begun 2007 with confidence."

Best said its rating reflected "TMR's excellent financial strength, overall favourable business performance and management profile. The excellent financial strength takes into consideration the parental support provided by TMR's parent, Tokio Marine and Nichido Fire Insurance Company, and advanced risk management practice."

Due to the highly volatile nature of catastrophe risks and the cyclic pricing market in the reinsurance industry, Best said Tokio Millennium Re could experience unfavourable short-run uncertainty.

However, in 2006, Tokio Millennium Re implemented a new business plan to take the company into its second phase in order to achieve a more stable profile and to reduce volatility.

The new approach consists of writing coverage further down into the mid to low property catastrophe layers and to diversify into other lines, such as terrorism, workers' compensation catastrophe and crop/hail business.

Tokio Millennium Re Limited was established in 2000 to act as a strategic risk diversifier for the Tokio Marine Nichido Group by accepting natural catastrophe business outside Japan. It has since undertaken a series of strategic initiatives to further diversify the geographical risk spread of the Group.

In 2006, Tokio Millennium Re reported total income of $307.2 million, of which earned reinsurance premiums of $264.5 million represented the great majority. At December 31, 2006, total assets were $1,159.0 million, and shareholder's equity totalled $771.7 million.