Fitch Ratings-Hong Kong/Tokyo-05 January 2016: Fitch Ratings has upgraded the Insurer Financial Strength (IFS) Rating of Mitsui Life Insurance Company Limited (Mitsui Life) to ‘A’ from ‘BBB+’, following Nippon Life Insurance Company’s (Nippon Life, IFS: A/Stable) completion of its tender offer to acquire Mitsui Life’s shares. Mitsui Life’s IFS rating has been removed from Rating Watch Positive, which was placed on 14 September 2015, and the Outlook is Stable.
KEY RATING DRIVERS
The rating upgrade for Mitsui Life is based on Fitch’s expectation that the company will benefit operationally and financially from being part of a larger and financially stronger group. Fitch considers Mitsui Life to be a “Very Important” entity within the Nippon Life group under Fitch’s Insurance Rating Methodology, and as a result has provided a two-notch uplift from its standalone IFS rating of ‘BBB+’.
Mitsui Life, which has strong ties with the Mitsui Group, will operate as a subsidiary of Nippon Life, while maintaining its brand name and distribution channels. Nippon Life and Mitsui Life also reached an agreement for certain Mitsui Group members, such as Sumitomo Mitsui Banking Corporation (Long-Term Issuer Default Rating: A/Stable), to re-acquire about 17% of Mitsui Life’s shares. This is to allow Mitsui Life to maintain its strong ties with the Mitsui Group.
Mitsui Life’s statutory solvency margin ratio (SMR) was 806.3% at end-September 2015, little changed from 812.4% at end-March 2015.
Nippon Life reported core profit of JPY679bn, while Mitsui Life reported JPY59bn in the financial year ending March 2015. Nippon Life had total assets of JPY62.0trn, while Mitsui Life had total assets of JPY7.4trn at end-September 2015.
RATING SENSITIVITIES
An upgrade of Mitsui Life is unlikely in the near future as the Insurer Financial Strength Rating is currently on par with Japan’s Long-Term Local-Currency IDR of ‘A’ with a Stable Outlook.
Key rating triggers that could lead to a downgrade include:
– A downgrade of Japan’s Long-Term Local-Currency IDR
– A downgrade of Nippon Life’s IFS rating
– Reduction in Mitsui Life’s strategic importance to Nippon Life
Source Fitch Ratings