Reuters logo
Fitch Affirms Fukoku Life at IFS Rating 'A'; Outlook Negative
December 15, 2016 / 6:13 AM / a year ago

Fitch Affirms Fukoku Life at IFS Rating 'A'; Outlook Negative

(The following statement was released by the rating agency) TOKYO/HONG KONG, December 15 (Fitch) Fitch Ratings has affirmed Fukoku Mutual Life Insurance Co's (Fukoku Life) Insurer Financial Strength Rating at 'A' a with a Negative Outlook and its Long-Term Issuer Default Rating at 'A-' with a Stable Outlook. Fitch has also affirmed the company's USD500m cumulative perpetual subordinated notes issued in September 2013 and USD500m cumulative perpetual subordinated notes issued in July 2015 at 'BBB+'. KEY RATING DRIVERS The ratings reflect Fukoku Life's solid capitalisation and stable life insurance underwriting business, with a successful focus on the more profitable "third" (health) sector. These strengths are offset by a smaller market share than its larger rivals, Japan's four major life insurers. The traditional Japanese life insurer's market share remains less than 5% in terms of the value of policies in force and the third sector's annual premium in force. Its risky assets/adjusted equity improved to 88% at end-March 2016, which is slightly better than Fitch's median of 90% for the 'A' rating category. Fukoku Life's statutory solvency margin ratio remains sufficient at 1,198% at end-September 2016 - the second-highest among Japanese traditional life insurers - compared with 1,224% a year earlier. This was mainly due to its large accumulated capital and reserves, high unrealised gains on securities and effective use of hybrid capital. Annualised premium in force at Fukoku Life's third sector continued to grow at a modest rate of 0.9% in April to September 2016. This was lower than some of its peers, partly because the company protected its profit margin amid ongoing price competition. Fukoku Life estimates that about half of its insurance underwriting profit is generated from third-sector products. Fitch expects this proportion to continue increasing. RATING SENSITIVITIES An upgrade of Fukoku Life's Insurer Financial Strength (IFS) Rating is unlikely in the near-term despite its strong credit fundamentals, which are better than those of most Japanese traditional life insurers. This is because the rating is constrained by Japan's Long-Term Local-Currency Issuer Default Rating (IDR) of 'A' with a Negative Outlook. Fukoku Life has a high level of government debt holdings (30% of invested assets at end-September 2016) with no overseas business diversification to counterbalance these holdings. Conversely, if Japan's Long-Term Local-Currency IDR were lowered, the issuer's IFS Rating would also likely be lowered. Upgrade triggers for Fukoku Life's IDR and hybrid debt ratings include the issuer achieving a larger market share, in terms of the value of policies in force and the third sector's annual premium in force, and a major position in the local life insurance market, or reducing its risky assets/adjusted equity ratio to below 90% for a sustained period while maintaining sound profitability and capitalisation. Downgrade triggers include a substantial erosion of capitalisation and deterioration in profitability, in particular if the statutory solvency margin ratio falls below 600% or financial leverage rises to above 35% (10% at end-September 2016) for a prolonged period. Contact: Primary Analyst Teruki Morinaga Director +81 3 3288 2781 Fitch Ratings Japan Limited Kojimachi Crystal City East Wing 3F 4-8 Kojimachi, Chiyoda-ku Tokyo 102-0083 Secondary Analyst Akane Nishizaki Associate Director +852 2263 9942 Committee Chairperson Jeffrey Liew Senior Director +852 2263 9939 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. 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. 15 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1016510 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. 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

Our Standards:The Thomson Reuters Trust Principles.
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