Press Release - JANUARY 19, 2018
A.M. Best Affirms Credit Ratings of Nippon Life Insurance Company and Its Subsidiary
FOR IMMEDIATE RELEASE
HONG KONG - JANUARY 19, 2018
The ratings reflect Nissay’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
The company’s level of balance sheet strength is underpinned by a risk-adjusted capitalization that A.M. Best views as the strongest possible, which is supported by modest underwriting leverage and a conservative investment portfolio. The company’s capital requirements, as measured by Best’s Capital Adequacy Ratio (BCAR), continue to be driven by asset risk due to its sizeable investment assets relative to its capital and surplus. Also, the company keeps a modest gap between asset and liability durations. Nissay’s financial leverage remains adequate for the current ratings.
Nissay reports a stable trend in premium income in terms of annualized premium equivalent, with growth in new sales over the past five years resulting from the company’s effort to shift toward the sale of protection-type products that offer a stable mortality margin. The company reports a moderate level of volatility in its operating results, which are susceptible to financial market conditions.
While Nissay maintained a market share of 18% – the largest among its peers and one which has remained stable over the long term – its geographic diversification remains modest given the relatively small size of the international operations.
Nissay is well-positioned at its current rating level. Negative rating actions could occur if there is material deterioration in risk-adjusted capitalization caused by substantial investment losses, or sustained deterioration in its operating performance.
The ratings of NLB reflect its balance sheet strength, which A.M. Best categorizes as strongest, as well as its marginal operating performance, very limited business profile and appropriate ERM.
The affirmation of NLB’s ratings considers the financial and operational support received from its parent company (Nissay) and NLB’s strategic importance to the parent, risk-adjusted capitalization being at the strongest level, and its evolving business diversification strategy. The company continues to maintain an established market position in the Asian markets within the United States. Further, NLB intends to build its ancillary business segment including group dental, life, disability and vision, as well as administrative services. NLB’s rating also considers Nissay’s financial strength and NLB’s strategic importance to its parent.
However, A.M. Best notes that NLB’s business remains concentrated in the group major medical market and in certain states. The group major medical market is highly competitive and the company has experienced volatility within this segment in recent years. Additionally, NLB also faces the challenges of complying with medical loss ratio requirements of the Affordable Care Act (ACA). A.M. Best will continue to monitor the impact of the ACA on NLB’s strategy and operating results over the near-term.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source.