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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 13, 2008 12:00 AM (EDT)
A.M. Best Co. has upgraded the issuer credit rating (ICR) to "a+" from "a" and affirmed the financial strength rating (FSR) of A (Excellent) of Meiji Yasuda Life Insurance Company (Meiji Yasuda) (Japan). The outlook for both ratings remains stable.
The ratings reflect the company's strong capitalization, solid core operating profitability, dominance in the group life insurance segment, gradual recovery of market profile and improved investment portfolio.
Meiji Yasuda's capitalization improved over the past four years. Its adjusted surplus improved by 15% year over year in fiscal year 2006 to JPY 4,029 billion (USD 34 billion). Although it is expected that Meiji Yasuda's capitalization level is likely to weaken in fiscal year 2007 due to lower unrealized capital gains, A.M. Best believes it is still very strong and will enable the company to withstand competition and the volatile business environment. In addition, the company has started to strengthen its reserve level for preparation of market valuation of its reserve.
Meiji Yasuda maintained a solid core profit in fiscal year 2006, and A.M. Best expects this to continue in fiscal year 2007. The negative interest margin was contained within an acceptable level, and expense profit and mortality profit was strong.
Adopting a rigorous revitalization plan after the business suspension in fiscal year 2005, the persistency rate has greatly improved, and the company is expected to continue showing recovery in fiscal year 2007. In addition to the improvement in corporate governance, Meiji Yasuda also is proactive in reducing its stock holdings and improving the soundness of its investment portfolio. Going forward, the company will continue to lengthen its asset duration to match its liability structure.
Offsetting these positive rating factors include the limited growth potential in the individual life insurance segment and a new competitive environment in the growing life insurance segment (such as individual annuity and third sector). Meiji Yasuda's higher susceptibility to the equity market compared to its peers (due to higher weighting on the financial sector of its equity portfolio) is another offsetting factor.
Due to changing demographics, Japan is facing a decline in in-force business. This has a direct negative impact on the individual life segment. Meiji Yasuda's in-force business in the individual life segment is also declining in line with the market size.
Competition in the growing life insurance segment is keen. This is driven by the higher number of players in the market and new means of distribution channels. Premium generated through bancassurance will continue to expand.
Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and assigned an ICR of "a" to Pacific Guardian Life Insurance Company, Ltd. (Honolulu), a wholly owned U.S. subsidiary of Meiji Yasuda and the largest life and health insurer in Hawaii. Consistent with that of its parent, Pacific Guardian's rating outlook is stable.
The ratings reflect Pacific Guardian's balanced operating profile, consistent statutory earnings, solid balance sheet and sound capitalization. The rating also recognizes the implicit financial support provided by Meiji Yasuda.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.