The 625 mW at 25o C, derated by 5 mW/K, is for ambient temperature (air outside the case).
The other rating, 1.5 W at 25o C, derated by 12 mW/K, is for case temperature.
Your 40o C case temperature implies a power rating of 1.2 W, so your 200 mW dissipation is conservative.