(The following statement was released by the rating agency)
TOKYO/HONG KONG, April 23 (Fitch) Fitch Ratings has affirmed
Fukoku Mutual Life
Insurance Company's (Fukoku Life) Insurer Financial Strength
(IFS) Rating at 'A'
and its Long-Term Issuer Default Rating (IDR) at 'A-'. The
Outlook is Stable.
Fitch has also affirmed the company's EUR300m fixed- to
subordinated callable notes due on 28 September 2025 and USD500m
perpetual subordinated notes at 'BBB'.
KEY RATING DRIVERS
The ratings reflect Fukoku Life's solid capitalisation and
stable life insurance
underwriting business with its successful focus on the more
(health) sector. These strengths are offset by its smaller size
compared with its larger rivals. Fukoku Life is the
traditional life insurer, with a market share of 3% by value of
force at end-March 2013.
Fukoku Life's capital adequacy has continued to improve. Its
margin ratio (SMR) rose to 1,053.5% at end-December 2013, the
among Japanese traditional life insurers. The SMR has improved
continuously accumulated capitalisation and reserves, increased
on securities and its effective use of hybrid capital. In
September 2013 the
company issued USD500m of cumulative perpetual subordinated
international investors to strengthen capitalisation.
Annualised premium in force at Fukoku Life's third sector has
increased at a
moderate but steady pace, rising 0.9% in April to December 2013.
estimates about half of Fukoku Life's total insurance
underwriting profit is
generated from its third-sector products and it expects the
this segment to continue to expand.
To better manage risk and cope with Japan's new economic
solvency regime, the
company is strengthening its enterprise risk management (ERM)
and is steadily
narrowing the duration gap between its assets and liabilities to
rate risk, which remains one of the primary risks for the
Fukoku Life was established in 1923 and it is one of Japan's
traditional life insurers.
Positive rating action may be considered if Fukoku Life
maintains its SMR at
well above 700%, or if Fitch's own assessment of capital
further, on a sustained basis. Fitch would also view positively
in the company's health insurance sector or further improvement
in the surrender
and lapse rates of death protection products.
Negative rating action may result from material erosion of
deterioration in profitability, particularly if Fitch's
assessment of capital
adequacy drops sharply, the SMR falls below 600% or financial
to above 35% (15.4% at end-December 2013), for a prolonged
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Additional information is available at www.fitchratings.com.
Applicable criteria, "Insurance Rating Methodology" dated 13
November 2013, are
available at www.fitchratings.com.
Applicable Criteria and Related Research:
Insurance Rating Methodology
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