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

21-Jan-2017 Intellasia | BusinessWire | 12:31 AM Print This Post

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.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its
subsidiaries. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Zack Chow, +852 2827 3418
Associate
Financial Analyst

[email protected]
or
Brian
Virostek,
+1 908 439 2200, ext. 5531
Financial Analyst
[email protected]
or
Christopher
Sharkey, +1 908 439 2200, ext. 5159

Manager, Public Relations
[email protected]
or
Jim
Peavy, +1 908 439 2200, ext. 5644

Director, Public Relations
[email protected]

 


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