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Fitch Affirms Meiji Yasuda Life at 'A'; Outlook Negative
October 14, 2016 / 4:11 AM / a year ago

Fitch Affirms Meiji Yasuda Life at 'A'; Outlook Negative

(The following statement was released by the rating agency) HONG KONG, October 14 (Fitch) Fitch Ratings has affirmed Meiji Yasuda Life Insurance Company's (Meiji Yasuda Life) Insurer Financial Strength (IFS) rating and its Long-Term Issuer Default Rating (IDR) at 'A'. The Outlook is Negative. Fitch has also affirmed the company's US dollar-denominated subordinated notes due 2045 at 'A-'. KEY RATING DRIVERS Meiji Yasuda Life's IFS rating is currently capped by Japan's Long-Term Local-Currency IDR of 'A' with Negative Outlook and is one notch below its unadjusted IFS rating of 'A+'. Fitch does not allow Meiji Yasuda Life to be rated above the sovereign, given the company's high level of government debt holdings (40% of Meiji Yasuda Life's invested assets as of end-March 2016) and its limited business diversification outside Japan. The affirmation of the rating reflects Meiji Yasuda Life's strong capitalisation, very strong business profile in Japan and satisfactory operating performance. The rating also reflects susceptibility of the company's capital adequacy to stock market movements due to its large exposure to domestic equities (equity investment to adjusted equity was 102% at end-March 2016). Fitch expects Meiji Yasuda Life to maintain a sufficient capital buffer - backed by foundation funds (kikin), retained earnings and subordinated debts. Its statutory solvency margin ratio (SMR) on a consolidated basis remained high at 984% at end-March 2016 compared with 1,068% a year earlier, despite its acquisition of StanCorp Financial Group, Inc. (SFG; IFS ratings of its life insurance subsidiaries: A/Stable) for about USD5bn.The very low interest rate environment currently has reduced the company's economic value-based capitalisation in Fitch's view, although the company's duration mismatch between assets and liabilities is smaller than that of its peers. Meiji Yasuda Life's core profit margin remained high at 14% in the financial year ending March 2016 (FYE16) versus 15% in FYE15, supported by increased investment gains and substantial mortality and morbidity gains. Sales of the higher-margin medical (third-sector) insurance remained strong at FYE16, with in-force premium rising 4% yoy, although the contribution of third-sector products to overall new business is still lower than its peers. To enhance investment income, Meiji Yasuda Life has been increasing investment in foreign securities, mainly in US dollar-denominated bonds since 2011. Fitch estimated that its unhedged foreign exposure to adjusted equity is higher than its peers. RATING SENSITIVITIES An upgrade of Meiji Yasuda Life is unlikely in the near future, as the Insurer Financial Strength Rating is currently limited by Japan's Long-Term Local-Currency 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 the consolidated SMR were to decline below 700% for a sustained period. - Decline in profitability due to a change in product mix - specifically, a decline in core profit margins to below 10% for a prolonged period. 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 Siew Wai Wan Senior Director +65 6796 7217 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Summary of Financial Statement Adjustments: - Adjusted equity: Contingency reserve and price fluctuation reserve are regarded as core capital for Japanese insurers and treated as adjusted equity. - Non-linked technical life provisions: Contingency reserve is deducted from technical life provisions. Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1013111 Solicitation Status here 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. 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 © 2016 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. 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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. 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