Best’s News & Research Service - January 23, 2015 09:00 AM (EST)
A.M. Best Assigns Ratings to The Dai-ichi Life Insurance Company, Limited
Hong Kong //BestWire// - A.M. Best has assigned a financial strength rating of A+ (Superior) and an issuer credit rating of "aa-" to The Dai-ichi Life Insurance Company, Limited (DL)(Japan). The outlook assigned to both ratings is stable.
The ratings reflect DL's robust level of risk-adjusted capitalization, improvement in its business profile and a trend of favorable operating performance.
DL's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), has continued to improve over the past three years, primarily owing to an increase in its capital and surplus, led by a recovery in the financial market conditions and improved profitability. In order to cope with the potential deterioration in financial market conditions, DL promotes diversification in asset allocation and continues to reduce risk assets such as investment into stocks. More recently, the company issued new shares as well as perpetual subordinated notes in order to enhance its capitalization and fund the acquisition of Protective Life Corporation (Protective) (headquartered in Birmingham, AL).
DL's profitability has continued to improve since its demutualization owing to favorable earnings results from its domestic life insurance businesses, as well as the increased contribution from the overseas businesses. More recently, DL completed its large-scale acquisition of Protective and is expected to report stable earnings sources and diversify its risk profile.
Partially offsetting these positive factors is the company's high exposure to the financial market volatility. Although the company continued to reduce its investment in stocks in terms of book value in the past five years, its exposure to stocks remains high compared to its adjusted capital and surplus.
While no positive movement in the ratings is expected in the short term, negative rating actions could occur if there is a material deterioration in the company's risk-adjusted capitalization triggered by adverse financial market movements.
The methodology used in determining these interactive ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Equity Credit for Hybrid Securities
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
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 visit A.M. Best's Ratings & Criteria Center.
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