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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MARCH 29, 2004 12:00 AM (EST)
A.M. Best Co. has affirmed the financial strength rating of A (Excellent) of Meiji Yasuda Life Insurance Company (Meiji Yasuda Life) (Japan). The outlook is negative.
The rating reflects the company's superior market profile enhanced by the recent merger between Meiji Life Insurance Company and Yasuda Mutual Life Insurance Company, improvement in the investment environment and its capitalization. The negative outlook reflects the continuous decline in in-force business and the pressure on profitability arising from the continuation of the negative interest margin and from the increased competition.
Meiji Yasuda Life has a strong market presence in the Japanese life market. The merger (effective January 2004) created the third-largest life insurance company in Japan and together has a market share of 13.6% with JPY 3.48 trillion (USD 29 billion) in premiums as of fiscal year 2002. Synergies are expected in cost savings, database management and customer service. Insurance portfolios will be better balanced between individual and group business, and the company is well positioned to compete with its peers. The surplus capacity will be used to explore new business and to improve its customer service.
Other positive factors include improvements in the investment market, as well as the continuous effort of Meiji Yasuda Life to enhance its asset portfolio. High competition and the stagnant life market in Japan led large companies to tighten their cost structures or to improve investment income. Thus, Meiji Yasuda Life is accelerating its effort to improve the cost structure.
Offsetting factors include Japan's intensely competitive life insurance marketplace stemming from the deregulation and liberalization of the financial services industry in general, along with the entry of foreign companies and companies from non-life insurance industry into the market. High cancellation rates combined with the changes in demographical structure in Japan has resulted in slowed new premium growth. Due to this environment, in-force business has declined in recent years.
Another offsetting factor is the susceptibility to the banking sector. The company's investment exposure to the financial industry is still considered high. These weakened fundamentals remain as potential risks and could result in continued pressure on Meiji Yasuda Life's operating performance, although it maintains a low non-performing loans ratio.
Concurrently, A.M. Best has affirmed the financial strength rating of A (Excellent) of Pacific Guardian Life Insurance Company, Limited (Honolulu, HI), a wholly-owned U.S. subsidiary of Meiji Yasuda Life and the largest life and health insurer in the state of Hawaii. Consistent with that of its parent, Pacific Guardian's rating outlook is negative.
The rating reflects the company's balanced operating profile, consistent earnings generation, solid balance sheet and sound capitalization. The rating also recognizes the financial support the company receives and the strategic role it serves as a subsidiary of Meiji Yasuda Life.
Offsetting factors include Pacific Guardian's need to achieve critical mass in its core businesses and the challenges it faces in broadening its distribution channels. A.M. Best also notes the company's need to increase new sales in its primary business lines while maintaining consistent statutory profitability.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.