A.M. Best Revises Outlooks to Positive for Nippon Life Insurance Company of America and Affirms Credit Ratings of Nippon Life Insurance Company

HONG KONG--(BUSINESS WIRE)-- A.M. Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” of Nippon Life Insurance Company of America (NLB) (Des Moines, Iowa, USA). Concurrently, A.M. Best has affirmed the FSR of A+ (Superior) and the Long-Term ICR of “aa-” of its parent, Nippon Life Insurance Company (Nissay) (Japan). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Nissay’s robust risk-adjusted capitalization, sound business profile and favorable operating results.

Nissay’s risk-adjusted capitalization remains strong despite the decrease in its capital and surplus led by the reduction in unrealized gains from its investment portfolio. The company successfully managed to issue subordinated bonds, taking advantage of low interest rates in 2016, which partially supported risk-adjusted capitalization while maintaining favorable financial leverage.

Nissay, with its dominant domestic market position, enjoys economies of scale. The company is able to maintain relatively stable profitability focusing on the sales of profitable protection-type products by leveraging its strong franchise and sales representative distribution network.

Offsetting rating factors are Nissay’s high investment risk and the relatively weak outlook for the domestic life insurance market. Although the company has shown progress in geographical diversification, contribution from overseas businesses remains limited to the consolidated group’s revenue and earnings.

Negative rating actions could occur if there is material deterioration in risk-adjusted capitalization caused by substantial investment losses or sustained deterioration in its operating performance.

The ratings of NLB reflect the financial and operational support received from its parent company, Nissay; its strong risk-adjusted capitalization level, an established position in Asian markets within the United States and an evolving business diversification strategy. The company continues to grow business within its core group Japanese and Korean segments. Although NLB intends to build materially its ancillary business segments including group dental, life, disability and vision, as well as administrative services, A.M. Best notes that the company’s business remains concentrated in the group major medical market in certain states.

NLB remains challenged by the highly regulated and volatile group major medical market, as demonstrated by the company’s lower net operating gains reported through late 2016 and in the prior year due to a higher-than-expected medical loss ratio (MLR) rebate as required by the Patient Protection and Affordable Care Act. Additionally, NLB’s premium revenue materially declined in the two years prior to 2016 from the transfer of premium revenue to other carriers after its exit from the small group medical business in New York and California, as well as the departure of a few large employer groups in response to rate increases. A.M. Best will continue to monitor the impact of the higher MLR rebate on NLB’s operating results and strategy going forward.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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A.M. Best

Zack Chow, +852 2827 3418

Associate Financial Analyst

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Brian Virostek, +1 908 439 2200, ext. 5531

Financial Analyst

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Christopher Sharkey, +1 908 439 2200, ext. 5159

Manager, Public Relations

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Jim Peavy, +1 908 439 2200, ext. 5644

Director, Public Relations

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Source: A.M. Best