AM Best Affirms Credit Ratings of The Dai-ichi Life Insurance Company, Limited

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.

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 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.

DLH’s balance sheet strength is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which was assessed as being at the strongest level. The group’s total reported capital increased by 46% year over year to JPY 3.9 trillion as of 31 March 2024, primarily driven by unrealised gains on securities amid favourable financial market conditions. The group’s economic solvency ratio, as calculated by its internal capital model, remained stable at above 200%, despite a volatile capital market environment in recent years. The group’s financial flexibility remains strong, supported by its access to equity and debt markets as a listed insurance group in Japan, while its financial leverage remains well managed under the group’s internal policy. In addition, the group has prudent asset-liability management practices in place to mitigate potential asset-liability mismatch risk, supported by effective asset allocation and reinsurance strategies.

DLH’s operating performance remained strong and resilient in the fiscal-year ended 31 March 2024, achieving consolidated premium income of JPY 7.5 trillion and a fundamental profit of JPY 525 billion. The group’s premium income and annualised premiums of new business also recorded strong growth, supported by higher demand for foreign currency-denominated single premium products in Japan and increased overseas sales contribution. In the first half of fiscal-year 2024, the group recorded further improvement in its fundamental profit, supported by higher investment spread and lower new business acquisition costs in its domestic life operations. Over the long term, AM Best expects DLH’s moderately diversified sources of profit, which are underpinned by a stable in-force book of business in Japan and profitable and growing overseas insurance operations, will enable it to generate solid fundamental profits on a sustainable basis.

DLH remains one of the largest private life insurance groups in Japan. In the domestic market, the group maintains a well-diversified distribution network through different brands (i.e. Dai-ichi Life, Dai-ichi Frontier Life Insurance Co., Ltd., and The Neo First Life Insurance Company, Limited), leveraging its extensive sales representative network, strong presence in bancassurance, and an expanding direct sales channel to meet customer needs across different segments. The group also demonstrates a level of geographical diversification, with its overseas insurance business contributing approximately 35% of the group’s in-force annualised premium and 28% of its adjusted net profit in fiscal-year 2023. DLH has continued to expand its business footprint through strategic acquisitions, including ipet Holdings and Benefit One in Japan, as well as Partners Life Limited in New Zealand, further strengthening its market position.

Negative rating actions could occur if there is material and sustained deterioration in DLH’s risk-adjusted capitalisation caused, for example, by a substantial increase in interest rate risk and investment risk, while capital growth remains insufficient. Negative rating actions also could occur if there is material and prolonged deterioration in the group’s operating performance caused by a substantial decline in its fundamental profit or in-force book of business. Positive rating actions could occur if the group demonstrates sustained improvement in its balance sheet strength metrics although the likelihood of such actions remains limited at this time.

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 Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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