Fitch Affirms Nippon Life at 'A'; Outlook Stable

(The following statement was released by the rating agency)TOKYO/SINGAPORE, December 07 (Fitch) Fitch Ratings has conducted its peer review committee on nine Japanese life insurers including Nippon Life Insurance Company (Nippon Life). The agency has affirmed the company's Insurer Financial Strength (IFS) Rating at 'A' and its Long-Term Issuer Default Rating at 'A', with a Stable Outlook. Fitch has also affirmed the company's subordinated notes due 2042 and 2044 at 'A-'.KEY RATING DRIVERSNippon Life's IFS Rating is currently constrained by Japan's Long-Term Local-Currency IDR of 'A' with a Stable Outlook, and rated one notch below its unadjusted IFS Rating of 'A+'. Fitch does not allow Nippon Life's rating to be above that of the sovereign, given the company's high level of government debt holdings - 30% of invested assets as of end-March 2015(FYE15) - and its lack of business diversification outside Japan.Nippon Life's ratings are supported by a market leading position in Japan's individual life industry; high-quality capital; low leverage and stable operating performance. However, capital adequacy remains highly susceptible to stock-market volatility due to its very high investment exposure to domestic equities (risky assets to adjusted equity of 125% at FYE15). Nippon Life's capital adequacy will remain sufficient, despite the planned acquisition of Mitsui Life Insurance Company Limited (IFS: BBB+/Rating Watch Positive) and Australia's MLC Limited (MLC), for approximately JPY500bn. The acquisition of MLC is in line with Nippon Life's strategy to boost growth by strengthening its overseas insurance business. However, operational integration risk, and successful management and governance of MLC Life will be crucial for Nippon Life to maximise the benefits from the acquisition, which is Nippon Life's first acquisition of a majority stake in an overseas company.Fitch expects Nippon Life's core profit margin to be stable, underpinned by substantial mortality and morbidity margins. Higher investment gains contributed to strong core profit growth of 14.6% yoy in FYE15, widening the core profit margin to 12.7%.RATING SENSITIVITIESAn upgrade of Nippon Life is unlikely in the near future as the Insurer Financial Strength Rating is currently on a par with Japan's Long-Term Local-Currency IDR.Key rating triggers that could lead to a downgrade include:- A downgrade of Japan's Long-Term Local-Currency IDR- A significant decline in the capital buffer - specifically, if SMR were to decline below 600% for a sustained period- Decline in profitability due to a change in product mix - specifically, a decline in core profit margins to below 10% for a prolonged period. Contact: Primary AnalystAkane NishizakiAssociate Director+852 2263 9942Fitch (Hong Kong) Limited19/F Man Yee Building68 Des Voeux Road CentralHong KongSecondary AnalystTeruki MorinagaDirector+81 3 3288 2781Committee ChairpersonKeith BuckleyManaging Director+1 312 368 3211Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com.Additional information is available on www.fitchratings.comApplicable Criteria Insurance Rating Methodology (pub. 16 Sep 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871172Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr _id=996078Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=996078Endorsement Policy https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&det ail=31ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.