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June 26 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Japan-based Taiyo
Life Insurance Company's (Taiyo Life) Insurer Financial Strength (IFS) rating at
'A'. The Outlook is Stable.
KEY RATING DRIVERS
The IFS rating reflects the company's growing profitable protection insurance
business and its strong capitalisation. Due to its overall solid fundamentals,
Taiyo Life is increasingly important to T&D Life Group, contributing to the
group's improving financial strength.
Taiyo Life's statutory solvency margin ratio (SMR) improved to 981.3% at
end-March 2014 from 823.4% a year earlier, mainly because the company has
further accumulated capital. This is lower than that of its sister company Daido
Life Insurance Company (IFS A+/Negative), but still commensurate with an 'A'
The company's financial leverage increased to 21.5% at end-March 2014 from 15.8%
a year earlier, because Taiyo Life issued dated subordinated debts of JPY50bn in
September 2013. This is high among IFS 'A' category domestic peers, but is still
considered consistent with an 'A' rating.
Taiyo Life's effective asset liability management (ALM) has resulted in its
assets and liabilities being closely matched in duration, which is exceptional
among Japanese traditional life insurers. Also, Taiyo Life's exposure to
high-risk assets remains one of the lowest among Japanese traditional life
insurers and is consistent with the company's current rating.
The company's underwriting fundamentals continue to improve due to its increased
efforts to promote protection products, which are more profitable than its other
products. The insurer's policy amount in force continued to grow, at 2.7% yoy in
the financial year ended March 2014 (FYE14), faster than that at most other
Japanese traditional life insurers.
Taiyo Life provides insurance for households, mainly for elderly women who have
been its core customers thus far.
Key rating triggers for an upgrade include further evidence of the company
becoming more integrated within T&D Holdings, Inc. (T&D) and therefore being
considered "core" to the group according to Fitch's group rating methodology. In
particular, further growth in protection insurance and strengthened capital
adequacy within the operating entities of T&D would be regarded as potential
Key rating triggers for a downgrade include material erosion of capitalisation,
deterioration in profitability and volatility in the embedded value within the
combined operating entities of T&D. Specifically, Taiyo Life's rating may also
come under pressure if Fitch's internal capitalisation measures for T&D drop
sharply, T&D's consolidated SMR declines below 600% (1,115.0% at end-March
2014), T&D's consolidated financial leverage increases above 35% (10% at
end-March 2014), or the embedded value at T&D becomes volatile for a prolonged