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 has shifted to a very strong level from the strongest level. The change mainly reflects the negative impact on the group’s available capital caused by the decline in the market value of its sizeable foreign fixed-income portfolio, stemming from the sharp increase in foreign interest rates since 2022. Nevertheless, the group’s economic solvency ratio, as calculated by an internal capital model, remained relatively stable at above 200% during the period. The balance sheet strength assessment also is supported by the group’s conservative financial leverage, albeit relatively higher when compared with some other life insurers in Japan. In addition, the group continues to manage the durations of its assets and liabilities to control any potential asset-liability mismatch risk.

DLH’s operating performance remained strong and resilient, achieving consolidated premium income of JPY 6.6 trillion and a fundamental profit of JPY 364 billion during fiscal year 2022. Over the past five fiscal years, the group’s return on equity remained strong with a five-year average of 6.1% despite COVID-19-related hospitalisation claim losses and volatile capital market in fiscal year 2022. In the first half of fiscal year 2023, the group recorded improvement in fundamental profit due to a decrease in COVID-19-related payments in the domestic market. Over the long term, AM Best expects the group’s stable in-force book of its domestic insurance business and a growing and profitable overseas insurance business should continue to support its profitability in a sustainable manner.

DLH remains one of the largest private life insurance groups in Japan. In the domestic market, the group has maintained diversified distribution channels through operating different brands (i.e. Dai-ichi Life, Dai-ichi Frontier Life Insurance Co., Ltd., and The Neo First Life Insurance Company, Limited) to meet customer needs across different segments. The group also demonstrates a level of geographical diversification by expanding its overseas insurance business, which contributed about 31% of the group’s in-force annualised premium and about 34% of the group’s adjusted net profit in fiscal year 2022.

Negative rating actions could occur if there is material and sustained deterioration in risk-adjusted capitalisation caused, for example, by a substantial increase in investment risk while capital growth remains insufficient. Negative rating actions also could occur if there is material and prolonged deterioration in 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.

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