HONG KONG, 09 February 2024–(BUSINESS WIRE)–AM the best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Rating of “aa-” (Superior) of The Dai-ichi Life Insurance Company, Limited (DL) (Japan), a wholly owned operating subsidiary of Dai-ichi Life Holdings, Inc. (DLH). The outlook for these Credit Ratings (ratings) is stable.
The ratings reflect the strength of DLH’s balance sheet, which AM Best rates as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management.
DLH is the ultimate parent for the entire Dai-ichi organization. AM Best sees DL as an integral part of the group, given its financial, operational and strategic importance to the overall organisation. Therefore, DL ratings are based on the balance sheet fundamentals and operating performance of the DLH organization, which are then specifically extended to DL.
DLH’s balance sheet strength is supported by its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which has moved to a very strong level from the strongest level. The change mainly reflects the negative impact on the group’s available capital caused by the decline in the market value of its substantial foreign fixed income portfolio, stemming from the sharp rise in foreign interest rates from 2022. However , the group’s economic solvency ratio, as calculated by an internal capital model, has remained relatively stable at over 200% over the period. The balance sheet strength rating is also supported by the group’s conservative financial leverage, albeit relatively higher when compared to some other life insurers in Japan. In addition, the group continues to manage the duration of its assets and liabilities to control any potential risk of asset-liability mismatch.
DLH’s operating performance remained strong and resilient, achieving consolidated premium income of JPY 6.6 trillion and an underlying profit of JPY 364 billion during fiscal 2022. Over the past five fiscal years, the group’s return on equity remained strong with a five-year average of 6.1% despite hospitalization claims losses related to COVID-19 and the volatile capital market in fiscal 2022. In the first half of fiscal 2023, the group recorded improvement in underlying profit due to a drop in payments related to COVID-19 in the marketplace. In the long term, AM Best expects that the strong book of its domestic insurance business group and a growing and profitable overseas business should continue to support its profitability in a sustainable manner.
DLH remains one of the largest private life insurance groups in Japan. In the domestic market, the group has maintained diversified distribution channels through the operation of various brands (eg Dai-ichi Life, Dai-ichi Frontier Life Insurance Co., Ltd., and The Neo First Life Insurance Company, Limited) for meet the needs of customers across various segments. The group also demonstrates a level of geographic diversification by expanding its overseas insurance business, which contributed about 31% of the group’s effective annual premium and about 34% of the group’s adjusted net profit in fiscal year 2022.
Negative rating actions may occur if there is a material and sustained deterioration in risk-adjusted capitalization, caused, for example, by a significant increase in investment risk while capital growth remains insufficient. Impairment actions may also occur if there is a material and prolonged deterioration in operating performance caused by a significant decline in its underlying profit or book of business in effect. Positive rating actions may occur if the group demonstrates sustained improvement in balance sheet strength measures, although the likelihood of such actions remains limited at this time.
Ratings are communicated to rated entities prior to publication. Unless otherwise stated, ratings were not changed after that communication.
This press release relates to the Credit Ratings that are published on AM Best’s website. For all rating information relating to the release and related disclosures, including details of the office responsible for issuing each of the individual ratings referred to in this release, please see AM Best’s Latest Rating Activity webpage. For additional information about the use and limitations of Credit Score opinions, please see Best’s Guide to Credit Scores. For information on the appropriate use of Best’s Credit Ratings, Best’s Performance Ratings, Best’s Preliminary Credit Ratings and AM Best’s press releases, please see the Guide to the Appropriate Use of Best’s Ratings and Reviews.
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