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A.M. Best Affirms Rating of Meiji Yasuda Life Insurance Company


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FOR IMMEDIATE RELEASE

OLDWICK, N.J. - JUNE 13, 2005 12:00 AM (EDT)
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 Meiji Yasuda Life's strong market presence, improved capitalization and enhanced profitability in recent years. The negative outlook reflects the continuous drop in new and in-force business and the increased competition in the Japanese life insurance market.

The company's risk-based capitalization has shown strong improvement in recent years. The local solvency ratio improved to 747.9% in fiscal year 2003 and stands at 802.9% as of September 2004. As Meiji Yasuda Life puts strong emphasis on capital management, volatility of the capitalization level is expected to decrease, and risk-based capitalization is expected to further improve.

The company was able to maintain its base profit at a high level due to its expense-cutting efforts. Net income improved significantly as sales and valuation losses from investment securities decreased. Meiji Yasuda Life benefited from the strong rebound of the Japanese equity market, as well as from its own efforts to reduce its equity portfolio. The current negative margin of the company is at a manageable level compared to its overall profitability.

Offsetting factors include the continuous drop in in-force business and the low retention rate of the agents. Recent business suspension due to inadequate corporate governance and internal control is viewed negatively as well.

Meiji Yasuda Life has a very strong market presence in the Japanese life market. The company ranks third in terms of premium market share, which was 12.7% as of fiscal year 2003. However, the company faces a declining trend of the premium volume, which will serve as the future profit base.

Changes in demographical structure in Japan have resulted in slowed new premium growth in the traditional individual market, and competition in the growing third sector and the annuity market is likely to intensify due to the deregulation and liberalization of the financial services industry in general and the entry of foreign companies and companies from other industries into the market. Traditional domestic life companies will need to develop flexible business strategies to maintain their current leading position in the new growing life segment.

Concurrently, A.M. Best has affirmed the financial strength rating of A (Excellent) of Pacific Guardian Life Insurance Company Ltd. (Honolulu), a wholly owned U.S. subsidiary of Meiji Yasuda Life and the largest life and health insurer in Hawaii. Consistent with that of its parent, Pacific Guardian's rating outlook is negative.

The rating reflects 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 Life.

Offsetting factors include Pacific Guardian's geographic concentration risk, the need to achieve critical mass in its core businesses and the challenges it faces in broadening its distribution channels. A.M. Best also notes Pacific Guardian's need to increase new sales in its primary business lines while maintaining consistent statutory profitability.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit Best's Rating Center.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source

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