September 27, 2017 / 7:53 AM / 3 months ago

Fitch Affirms Nippon Life at 'A'; Outlook Stable

(The following statement was released by the rating agency) HONG KONG/TOKYO, September 27 (Fitch) Fitch Ratings has affirmed Nippon Life Insurance Company's (Nippon Life) Insurer Financial Strength (IFS) rating and its Long-Term Issuer Default Rating (IDR) at 'A'. The Outlook is Stable. Fitch has also affirmed the company's US dollar-denominated subordinated notes at 'A-'. A full list of rating actions is at the end of this commentary. KEY RATING DRIVERS Nippon Life's IFS is constrained by Japan's sovereign IDR of 'A' and rated one notch below the insurer's unconstrained IFS rating of 'A+'. Fitch will not rate Nippon Life above the sovereign due to the company's high level of government debt holdings (30% of invested assets as of 31 March 2017) and its limited business diversification outside Japan. The affirmation of the rating reflects Nippon Life's very strong market position, underpinned by a strong countrywide tied-agents network, sufficient capitalisation, stable profit margins and modest financial leverage. The rating also reflects its large exposure to domestic equities (equity investment to adjusted equity was 136% at end-March 2017), which renders its capital positon vulnerable to a downturn in the domestic stock market. Fitch believes Nippon Life is likely to maintain sufficient capitalisation, backed by foundation funds (kikin), sustainable retained earnings and subordinated debt. Its statutory solvency margin ratio (SMR) on a consolidated basis was 934% at the end of the financial year to March 2017 (FYE17), compared with 923% at FYE16. However, Fitch believes Nippon Life's economic value-based capitalisation is being negatively affected by the current low-interest environment due to a duration mismatch between assets and liabilities, along with many other Japanese life insurers. Fitch expects its core profit to be stable over the next few years, underpinned by substantial mortality and morbidity margins from its seasoned life insurance portfolio. Earnings are also backed by marginal growth in third-sector (medical) insurance plans, which generated a wider morbidity margin. The group's third-sector annualised in-force premiums rose 2% in FYE17. Fitch estimates Nippon Life's consolidated financial leverage ratio, including the kikin and subordinated notes issued in 2017, would have been below 15% on a proforma basis at FYE17. The ratio is well below the median 28% of 'A' rated insurers, based on Fitch's methodology. RATING SENSITIVITIES An upgrade of Nippon Life's ratings is unlikely in the near future as the Insurer Financial Strength rating is currently on par with Japan's Long-Term Local-Currency IDR. However, the ratings on the subordinated notes would remain at 'A-' even if Nippon Life's IFS rating and IDR were downgraded to 'A-' due to a downgrade of Japan's IDR. Key rating triggers that could lead to a downgrade include: - A downgrade of Japan's Long-Term Local-Currency IDR - A significant decline in the capital buffer, specifically, if consolidated SMR were to decline below 600% for a sustained period - A decline in profitability due to a change in product mix, specifically, a decline in Nippon Life's core profit margin below 10% for a prolonged period FULL LIST OF RATING ACTIONS Nippon Life Insurance Company: --IFS Rating affirmed at 'A'; Outlook Stable, --Long-Term IDR affirmed at 'A'; Outlook Stable, --USD2.0 billion subordinated notes due 18 October 2042 affirmed at 'A-' --USD2.25 billion subordinated notes due 16 October 2044 affirmed at 'A-' --USD1.5 billion subordinated notes due 20 January 2046 affirmed at 'A-' Contact: Primary Analyst Akane Nishizaki Associate Director +852 2263 9942 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central Hong Kong Secondary Analyst Teruki Morinaga Director +81 3 3288 2781 Committee Chairperson Jeffrey Liew Senior Director +852 2263 9939 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy 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 WEB SITE AT 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. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below