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Fitch Affirms Mitsui Life Insurance at 'BBB'; Outlook Stable
August 29, 2014 / 6:41 AM / 3 years ago

Fitch Affirms Mitsui Life Insurance at 'BBB'; Outlook Stable

(The following statement was released by the rating agency) HONG KONG/TOKYO, August 29 (Fitch) Fitch Ratings has affirmed Mitsui Life Insurance Company Limited's (Mitsui Life) Insurer Financial Strength (IFS) Rating at 'BBB'. The Outlook is Stable. KEY RATING DRIVERS The company's rating reflect Mitsui Life's sufficient capitalisation for its current rating category, moderate investment risks and its strategic focus on more lucrative medical and healthcare products (known in Japan as third-sector products). The ratings also take into account the relatively high degree of sensitivity of its embedded value to potential movements in interest rates due to duration mismatch between assets and liabilities and relatively low core profit margins. Mitsui Life's statutory solvency margin ratio (SMR) continued to improve to 648.5% at the end of financial year 2014 on 31 March (FYE14), from 601.3% a year earlier, helped by favourable market performance and, to a lesser extent, a gradual recovery in its adjusted equity. The company's ratio of risky assets to adjusted equity is adequate for its current rating category (116.5% at FYE14), but further improvement in the near term will be slow considering its adjusted equity is likely to continue increasing only modestly and Fitch's expectation that the company will maintain its current exposures to domestic equities. Mitsui Life's core profit margin, excluding the impact of changes in variable annuity reserves, improved to 6.3% at FYE14 from 5.2% at FYE13 due to a reduction of the negative spread burden. However, the margin remained low compared with its peers due to its negative spread burden. The company maintained a higher value of new business margins than its peers, reflecting its focus on third-sector products. However annualised new sales premiums for the third sector have declined for the fourth straight year in FY14 despite the recovery seen in the second half of the financial year. Mitsui Life's mortality gains could deteriorate given its declining market share, unless there is a turnaround in sales of third-sector products. RATING SENSITIVITIES Key rating triggers for an upgrade include sustained improvement in its capital adequacy measured by Fitch and a turnaround in sales of third-sector products. Key rating triggers for a downgrade include deterioration of capitalisation, a significant decline in profitability or increased sensitivity to interest rate movements. In particular, a downgrade will be considered if the SMR falls below 400% for a sustained period or if the core profit margin, excluding the impact of changes in variable annuity reserves, falls below 5% for a sustained period. Contact: Primary Analyst Akane Nishizaki Associate Director +852 2263 9942 Fitch (Hong Kong) Limited 2801, Tower Two, Lippo Centre 89 Queensway, Hong Kong Secondary Analyst Teruki Morinaga Director +81 3 3288 2781 Committee Chairperson Stephan Kalb Senior Director +49 69 768076 118 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on Applicable criteria, 'Insurance Rating Methodology'', dated 13 November 2013, are available at Applicable Criteria and Related Research: Insurance Rating Methodology here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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