The ratings reflect Toa Re’s robust risk-adjusted capitalization and strong business profile in Japan. Toa Re maintains a robust level of capitalization owing to conservative risk management in its underwriting and investment practices. Toa Re has enhanced its enterprise risk management over the past five years. Additionally, the company has expanded its life and health reinsurance segments over the past five years and has reduced its exposure to catastrophe risks in order to achieve stable profitability. Also, Toa Re tightly controlled risk exposure in investment assets during the same period, particularly in stocks. As a sole domestic reinsurance company, Toa Re has a strong relationship with the major cedants in Japan, which are its major shareholders, enabling the company to maintain a stable market share in the domestic market.

Partially offsetting factors are Toa Re’s relatively weak operating performance and overall volatile track record. The company’s financial results have varied widely in the past five years primarily due to the large-scale catastrophe losses in 2011. However, the change in its business mix and a reduction in risk in its investment portfolio have helped the company to stabilize its overall performance in the past three years, albeit profitability is weak when compared with its peers. Toa Re’s operating results have underperformed its peers over the past five years based on several key financial measures.

While positive rating actions are unlikely, downward pressure could arise if there is a substantial decline in risk-adjusted capitalization caused by significant deterioration in underwriting results or an adverse movement in the financial market.

The ratings of U.S.-based TRA are aligned with its ultimate parent, Toa Re, and reflect the company's strategic importance as an operating subsidiary of Toa Re. TRA continues to have a well-established position within the U.S. regional markets, as well as solid customer relationships, a strong risk-adjusted capital position, a well-diversified book of business and a continued focus on underwriting performance. The U.S. operation has grown to represent a significant portion of premiums and operating income for the organization and provides Toa Re with an opportunity for strategic international expansion and portfolio diversification. At the same time, TRA benefits from the global presence and financial strength of Toa Re.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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