A.M. Best Revises Issuer Credit Rating Outlook to Positive for Toyota Motor Insurance Company
A.M. Best has revised the Long-Term Issuer Credit Rating (Long-Term ICR) outlook to positive from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICR of "a" of Toyota Motor Insurance Company (TMIC) (Cedar Rapids, IA). The outlook of the FSR remains stable.
The Credit Ratings (ratings) reflect TMIC's excellent risk-adjusted capitalization and strong profitability driven by favorable underwriting returns supplementing net investment income. Additionally, TMIC produces strong cash flows while maintaining liquidity and leverage metrics that outperform the industry composite. TMIC also benefits from support provided by its ultimate parent, Toyota Motor Corporation (Toyota). TMIC plays a strategic role within the Toyota organization by providing vehicle service agreements, guaranteed auto protection agreements, excess wear and use coverage, and tire and wheel protection sold through Toyota, Lexus and affiliated dealerships throughout the United States.
Somewhat offsetting these positive rating factors are TMIC's limited business profile as a single-parent captive and its reliance on new and used automobile sales at Toyota dealerships to generate premium. Although automobile sales have been up since the economic crisis of 2008, sluggish economic conditions, strong competition or another downturn in the economy could hamper vehicle sales. These concerns are primarily mitigated by the company's better-than-average earnings and strong balance sheet.
The outlook of the Long-Term ICR is positive due to A.M. Best's expectation of continued strong earnings and risk-adjusted capitalization despite upward movement in the combined ratio and continuation of the low interest rate environment.
Positive rating actions could occur if TMIC continues to produce sustainable robust overall earnings while maintaining its strong level of risk-adjusted capitalization. Negative rating actions could occur if the company's underwriting performance shows a decline or demonstrates volatility negatively impacting earnings and risk-adjusted capitalization over time.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best's Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings.
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Stephen Ruane, +1 908-439-2200, ext. 5431
Senior Financial Analyst
Charles M. Huber, +1 908-439-2200, ext. 5122
Assistant Vice President
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
Jim Peavy, +1 908-439-2200, ext. 5644
Assistant Vice President, Public Relations