AM Best Affirms Credit Ratings of Nippon Life Insurance Company and Its Subsidiary

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

The ratings of Nissay reflect its balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management (ERM).

Nissay’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 company’s low financial leverage. Although the company is exposed to moderate equity risk from its stock investment portfolio, its sizable available capital and its good access to debt markets as a well-known life insurance company in Japan and overseas should allow it to absorb such risk.

Nissay’s operating performance has been consistent and resilient amid the COVID-19 pandemic. For the fiscal year ended 31 March 2021 (FY2020), its core operating profit remained stable at JPY 690 billion. Although the company’s annualised premiums from new policies declined due to sales restrictions in the first half of FY2020, its annualised premiums from new policies have been recovering since the second half of FY2020. AM Best expects that the company’s new sales performance will continue to recover, and the company’s stable in-force book of business will continue to support its core operating profit sustainably.

Nissay is one of the leading life insurance companies in Japan, with a market share of 18% in terms of premium income. The company’s sales representative base remains strong, and it is making efforts to diversify its distribution channels further to achieve revenue growth and strengthen profitability in its domestic market. The company continues to have modest geographical diversification, with its relatively small operations in other Asia-Pacific countries and the United States.

The stable outlooks reflect AM Best’s expectation that Nissay will maintain its overall balance sheet assessment, supported by its risk-adjusted capitalisation at the strongest level, as measured by BCAR. Ongoing strategic initiatives by management and a diversified product portfolio also are expected to support a stable operating performance over the intermediate term.

Negative rating actions could occur if there is material deterioration in Nissay’s risk-adjusted capitalisation caused by substantial investment losses. Negative rating actions also could occur if there is material deterioration in operating performance caused by substantial decline in the company’s core operating profit.

The ratings of NLB reflect its balance sheet strength, which AM Best assesses as strongest, as well as its marginal operating performance, limited business profile and appropriate ERM. The ratings also take into consideration NLB’s strategic importance to Nissay, as well as operating support provided by its parent company. NLB’s balance sheet strength is supported by its risk-adjusted capitalization at the strongest level, as measured by BCAR, which is enhanced by a conservative portfolio and strong liquidity measures. The capital growth lagged premium expansion over the past five years, as net income has remained relatively modest, and the company continued to pay dividends to the parent. However, capital remains more than sufficient to support NLB’s risks. NLB has reported volatile underwriting results over the past five years. However, results improved in 2018 and 2019, and were especially profitable in 2020 due to the deferral of non-essential care driven by the COVID-19 pandemic. Underwriting results reverted toward pre-pandemic levels, but remained elevated as utilization rebounded through three quarters 2021 due to a combination of higher normal utilization and COVID-19 testing and treatment. Through three quarters of 2021, COVID-19 testing and treatment costs at NLB were higher than in 2020 but lower than seen across the industry, and within budgeted ranges. The ongoing pandemic has impacted NLB’s sales function significantly by limiting face-to-face interaction, which is a key portion of the procurement process of many companies that make up NLB’s market niche. As a result, premiums declined moderately in 2020 and 2021 despite higher than historical persistency and above market rate increases.

The company maintains limited product diversification with a high concentration in group major medical business and geographic concentration in a few states. NLB’s strategy includes growing its dental and vision products where profit margins tend to be stronger. However, COVID-19 pandemic resulted in lower-than-expected new sales for major medical and ancillary lines of business.

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 AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

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Charles Chiang
Associate Financial Analyst
+852 2827 3427

Jason Shum
Associate Director, Analytics
+852 2827 3424

John McGlynn, CFA
Financial Analyst
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Christopher Sharkey
Manager, Public Relations
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Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644

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