The new-sales performance of Nippon Life Insurance Company (Nissay) is likely to be affected negatively over the near term by the COVID-19 pandemic and the low foreign interest rate environment, says AM Best.
Nevertheless, the global credit rating agency expects that the company’s stable in-force book of business will continue to support its core operating profit sustainably.

Indeed, Nissay’s operating performance has been strong and consistent, supported by a stable trend of premium income and core operating profit in the past. Annualised premiums from new policies declined over the first quarter of fiscal-year 2020 (April to June 2020), during which Japan declared a state of emergency, although this quickly recovered to 75% of the pre-pandemic level in the second quarter.

AM Best has affirmed Nissay’s Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa-”. Concurrently, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of Nippon Life Insurance Company of America (dba Nippon Life Benefits or NLB) (West Des Moines, Iowa, USA). The outlook of these credit ratings is stable.

Balance sheet strength

The ratings of Nissay reflect its balance sheet strength, which AM Best categorises 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, with an adjusted debt leverage ratio well below 25%. In addition, its strong business network and good reputation as a life insurance company in Japan and overseas allow it to have good access to debt markets.

Business profile

Nissay is one of the leading life insurance companies in Japan, with a market share of 19% in terms of premium income. The company continues to have a strong sales representative base and is making efforts to diversify its distribution channels further to achieve greater revenue growth in its domestic market. The company continues to be diversified modestly in terms of geography, given its relatively small operations in other Asia Pacific countries and the US.

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 also are expected to ensure Nissay maintains a stable operating performance over the intermediate term.

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