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Press Release - JANUARY 22, 2016

A.M. Best Affirms Ratings of Nippon Life Insurance Company and Its Subsidiary


CONTACTS:
 Seewon Oh
Associate Director, Analytics
+852-2827-3404
seewon.oh@ambest.com

Brian Virostek
Financial Analyst
+(1) 908 439 2200, ext. 5531
brian.virostek@ambest.com

Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

HONG KONG - JANUARY 22, 2016
A.M. Best has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit rating (ICR) of “aa-” of Nippon Life Insurance Company (Nissay) (Japan). Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of “a-” of Nissay’s subsidiary, Nippon Life Insurance Company of America (NLB) (Des Moines, Iowa, USA). The outlook for all ratings is stable.

The ratings reflect Nissay’s robust risk-adjusted capitalization, favorable operating results and strong market positions across all business lines. Nissay continues to generate favorable earnings in the past five years in terms of core profits owing to the widening interest margin. The company possesses the scale and depth in the product offerings by leveraging on its strong franchise. The company has adequate risk management capabilities, which incorporate extensive use of stress test to cope with the volatilities in financial market conditions. In addition, Nissay’s financial leverage remains favorable with its strong liquidity position. In 2015, Nissay started acquiring overseas life insurance operations. Although the scale of international operations remains small to the group, the progress of the group’s integration should be monitored going forward.

Partially offsetting rating factors are Nissay’s high exposure to the investment risk and the relatively sluggish outlook for the domestic life insurance market amid intensifying market competition.

Negative rating actions could occur if there is a material deterioration in the company’s capitalization, a sustained deterioration in its operating performance or diminished liquidity positions.

The affirmation of NLB’s ratings reflects the financial and operational support received from its parent company, Nissay; its established position in Asian markets within the United States and its evolving business diversification strategy. In addition to maintaining a sizable position within its core small group Japanese business segment, the company continues to grow its business among U.S. operations of South Korean companies. While NLB intends to significantly build its ancillary business segments including group dental, life, disability and vision, as well as administrative services, A.M. Best notes that NLB’s business remains concentrated in the group major medical market and in a few states.

NLB remains challenged by the highly competitive nature and volatility within the group major medical market, as demonstrated by a material decrease in premium revenue over the last two years. This decrease was driven primarily by discontinued community-rated group medical business in New York rolling off to other carriers, which resulted from the company’s decision to exit the small group medical market in New York and California. Additionally, a few large employer groups departed in 2014 in response to proposed rate increases. The company reported a materially lower net operating gain through late 2015 versus the same period in the prior year due to a higher than expected medical loss ratio (MLR) rebate as required by the Affordable Care Act (ACA). A.M. Best will continue to monitor the impact of this higher MLR rebate on NLB’s operating results and strategy going forward.

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

This press release relates to rating(s) 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.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.


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