(The following statement was released by the rating agency)
TOKYO/HONG KONG, April 16 (Fitch) Fitch Ratings has affirmed
Mutual Life Insurance Co.'s (Asahi Life) Insurer Financial
Strength (IFS) rating
at 'BB'. The Outlook is Positive.
KEY RATING DRIVERS
The IFS rating reflects Asahi Life's weak capital adequacy
compared with its
peers' as well as its resilient insurance underwriting backed by
effective focus on the more profitable third (health) sector.
Asahi Life's statutory solvency margin ratio (SMR) improved to
end-December 2013 from 495.8% at end-March 2013, due to its
capitalisation and reserves, its increased unrealised gains on
its continuous efforts to reduce risk in its investments.
The company's insurance underwriting business has been stable
due to its
effective focus on the more profitable third sector. Annual
premiums of in-force
policies of Asahi Life's third sector grew 1.3% in April to
partly because it launched a care insurance product, ahead of
most of its peers.
Fitch believes that the company's efforts in promoting third
sector products via
several non-traditional channels, including banks, are likely to
its strength in this segment.
Nevertheless, in comparison with its peers' average SMR of more
than 700%, Asahi
Life's capital position is weak. In addition, Asahi Life's
burden remains sizable and continues to offset gains from
mortality and morbidity rates. However, Fitch expects the
adequacy to slowly but steadily strengthen due to accumulated
The agency also expects Asahi Life's negative spread burden to
as a consequence of gradually declining average guaranteed
yields over the
Asahi Life is the sixth-largest traditional domestic life
insurer in Japan with
a 3% market share by value of policies in force at end-March
Key rating triggers for an upgrade include: a further
capitalisation, particularly if the SMR remains well above 400%;
improvement in Fitch's internal capitalisation measure; and a
financial leverage (with kikin (foundation funds) treated as
debt) to below 45%,
on a sustained basis. Growth in the company's third sector
reduction in the surrender and lapse rates of its death
would also be viewed positively by Fitch.
Key rating triggers for a downgrade include: material erosion of
specifically, a decline in the SMR to below 300% or
deterioration in Fitch's
internal capitalisation measure on a sustained basis.
in profitability would also put the rating under pressure.
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Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935,
Additional information is available at www.fitchratings.com.
Applicable criteria, 'Insurance Rating Methodology', dated 13
November 2013, are
available on www.fitchratings.com.
Applicable Criteria and Related Research:
Insurance Rating Methodology
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