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, a wholly owned subsidiary and captive insurer of ITOCHU, one of Japan’s largest general trading companies.

The outlook of these credit ratings is stable.

The agency said the ratings reflected NEWGT’s balance sheet strength, which AM Best assessed 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.

AM Best said: “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.”

AM Best said NEWGT’s operating performance had been consistently positive during the most recent five-year period.

For the fiscal year ended March 31 2023, the company recorded notable growth in both premium income and net profit.

The agency said 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 said, it expected that NEWGT’s operating performance would remain profitable over the intermediate term given the company’s prudent underwriting practices and reinsurance programmes.

AM Best said: “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.”

AM Best said negative rating actions could occur if NEWGT’s risk-adjusted capitalisation significantly deteriorated, 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.

The agency said positive rating actions could occur if NEWGT demonstrated sustained and notable improvement in its underwriting and operating profitability for a period of time, while maintaining a robust level of risk-adjusted capitalisation.