AM Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) of Bermudian-based NEWGT Reinsurance Company Ltd.

The outlook of these credit ratings is stable.

NEWGT is a wholly owned subsidiary of Itochu Corporation, one of Japan’s largest general trading companies listed on the Tokyo Stock Exchange.

The ratings 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.

The balance sheet strength is well-supported by NEWGT’s risk-adjusted capitalisation, which is assessed at the strongest level, as measured by Best’s capital adequacy ratio.

The company’s balance sheet strength also is underpinned by its favourable balance sheet liquidity and healthy capital structure. Although the company has moderate reliance on reinsurance, this risk is mitigated by its high-quality and well-diversified reinsurance panel.

NEWGT’s operating performance has been consistently stable and profitable with a five-year average net loss ratio and net combined ratio of 65 per cent and 91 per cent (2017-2021), respectively.

For the fiscal year ended March 31, NEWGT’s underwriting profit from its general account improved to JPY 226 million (approximately $1.55 million) from JPY 45 million (approximately $308,000) as a result of business recovery from the Covid-19 pandemic and higher commodity prices.

NEWGT continued to report low but stable investment returns with its conservative investment strategy. Prospectively, AM Best expects the company’s overall operating performance will remain profitable with its premium income to continue to benefit from the recovery of its parent company’s trading business and its combined ratio to remain stable.

As a single-parent captive of Itochu, Itochu-related marine business continues to form a large majority of NEWGT’s business in terms of net premium written. In addition, the company has been diversifying its portfolio through underwriting some third-party and non-marine risks through its segregated account, which consists of well-diversified and less volatile lines such as theft insurance, renters’ insurance and group personal accident.

Negative rating actions could occur if there are substantial underwriting losses caused by a material shift in its risk appetite. Negative rating actions also could arise if there is significant deterioration in Itochu’s credit profile, including its operating profitability, financial leverage and interest coverage levels.