AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Rating of "aa-" (Superior) of The Dai-ichi Life Insurance Company, Limited (DL) (Japan), the wholly owned operating subsidiary of Dai-ichi Life Holdings, Inc. (DLH). The outlook of these Credit Ratings (ratings) is stable.
DLH is the ultimate parent for the entire Dai-ichi organisation. AM Best views DL as being integral to the group, given its financial, operational and strategic importance to the overall organisation. Accordingly, DL's ratings are based upon the balance sheet fundamentals and operating performance of the DLH organisation, which are then extended specifically to DL.
The ratings reflect DLH's balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management.
DLH's balance sheet strength assessment mainly reflects its risk-adjusted capitalisation at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR). This assessment also is supported by the group's low financial leverage, albeit higher than some of the life insurers in Japan. In addition, the group continues to manage the durations of its assets and liabilities actively to control any potential asset-liability mismatch risk.
DLH's operating performance has been strong and stable amid the COVID-19 pandemic, supported by stable premium income and fundamental profit with low volatility in the past. While the group's operating performance was adversely affected by Japan's sales activity restrictions in the first half of fiscal-year 2020, it has continued to recover since the second half of fiscal-year 2020 with significant improvement in annualised premium of new business. AM Best expects that the group's new sales performance will continue to improve, and the group's stable in-force book of business will continue to support its fundamental profit.
DLH remains one of the largest life insurance groups in Japan. In its domestic market, the group has diversified its distribution channels by developing different brands (i.e. Dai-ichi Life, Dai-ichi Frontier Life and Neo First Life) to meet different customer needs. The group has also sought geographic diversification by expanding its overseas insurance business, which contributed 21% of the group's adjusted profit in fiscal-year 2020.
The stable outlooks reflect AM Best's expectation that DLH will maintain its overall balance sheet strength, supported by its risk-adjusted capitalisation at the strongest level, as measured by BCAR. Ongoing strategic initiatives implemented by management and its stable in-force business are also expected to support a consistent and strong operating performance over the intermediate term.
Negative rating actions could occur if there is a material deterioration in the group's risk-adjusted capitalisation caused by factors such as substantial investment losses. Negative rating actions also could occur if there is material deterioration in operating performance caused by a substantial decline in its fundamental profit or in-force book of business.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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