Press Release - JANUARY 18, 2019
AM Best Affirms Credit Ratings of Nippon Life Insurance Company and Its Subsidiary
FOR IMMEDIATE RELEASE
HONG KONG - JANUARY 18, 2019
The ratings of Nissay reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
Nissay’s balance sheet strength assessment mainly reflects its risk-adjusted capitalization being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). This is supported by a very large adjusted capital base, which consists of reported capital, contingency reserves and price fluctuation reserves, as well as some equity credit for subordinated debt. In addition, while balance sheet debt has grown, the company’s financial ratios remain conservative, with adjusted debt leverage ratios generally under 25%.
Operating performance also has been strong and consistent, supported by stable levels of premium income and core operating profits. Nissay has continued to maintain 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/morbidity margin.
While Nissay maintained a market share of 18% in terms of premium income – 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.
The stable outlooks reflect AM Best’s expectation that Nissay will maintain strong and consistent operating performance, supported by steady revenue growth and an in-force book that can generate stable core operating profits on a sustainable basis. 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 operation performance, limited business profile and appropriate ERM.
The revised outlooks are the result of volatility in NLB’s underwriting results over the past few years and in 2018. A.M. Best notes that NLB maintains a limited product diversification with high concentration in the group major medical segment. Furthermore, over nine-tenths of the company’s business is derived from six states, somewhat exposing it to geographic concentration. NLB’s primary business continues to face challenges of complying with medical loss ratio requirements of the Affordable Care Act. Additionally, underwriting results have been negatively impacted by higher claims experience in certain states and payment of the health insurance fee in 2018.
Despite the recent underwriting setbacks, NLB’s risk-adjusted capitalization has remained at the strongest level in recent years. The company continues to maintain an established market position in the Asian markets within the United States. Additionally, NLB’s ratings consider the financial and operational support afforded by its parent company, Nissay and its strategic importance to the parent.
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 AM 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 AM 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 AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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