Japan-Based Meiji Yasuda General Assigned #A/A-1# Outlook Stable

Stocks and Financial Services Press Releases Tuesday April 18, 2017 17:43
TOKYO--18 Apr--S&P Global Ratings

TOKYO (S&P Global Ratings) April 18, 2017--S&P Global Ratings today said it has assigned its 'A' financial strength and long-term counterparty credit ratings to Meiji Yasuda General Insurance Co. Ltd. At the same time, we have assigned our 'A-1' short-term counterparty credit rating to the company. The outlook on both the financial strength and long-term counterparty credit ratings is stable.

We base the ratings on our view that Meiji Yasuda General is a core subsidiary of the Meiji Yasuda Life group, considering it is integral to the group in terms of administrative and operational activities and infrastructure. Under our group rating methodology, we equalize our long-term counterparty credit rating on Meiji Yasuda General with the group's credit profile of 'a' because we regard the company as a core subsidiary of the Meiji Yasuda Life group.

Meiji Yasuda General is a wholly owned subsidiary of Meiji Yasuda Life that operates solely in Japan. Meiji Yasuda General was established in April 2005 as a result of a merger between Meiji General Insurance Co. Ltd. and Yasuda General Insurance Co. Ltd. It primarily offers voluntary accident insurance-type plans to group members by cross-selling to Meiji Yasuda Life's customers and leveraging the sales and information technology (IT) infrastructure shared by both companies. Meiji Yasuda General's business model is aligned with the strategy of the life insurance business of the Meiji Yasuda Life group. Its administrative and operational activities, as well as its IT infrastructure, are linked to the group. This makes it difficult for it to part from the group.

Meiji Yasuda General has an approximately 0.1% share in Japan's nonlife insurance market. It specializes in corporate insurance, specifically group accident and group medical insurance and miscellaneous lines for enterprises.

It provides mainly products tied to benefit packages. These include accident insurance, which supports corporate and group benefit plans for Meiji Yasuda Life's group life insurance customers. Accident insurance accounts for nearly 80% of Meiji Yasuda General's net premiums written. Risk solution products, such as commercial credit insurance and directors' and officers' liability insurance, account for nearly 10% of its net premiums written.

Meiji Yasuda General's combined ratio is stable at just below 90%, lower than the average for Japan's nonlife insurers. The ratio stood at 87.1% for the three quarters ended December 2016. This is because its expense ratio for the same period was high (46.7%) due to its relatively small business scale, while its loss ratio was steady at a low level (40.4%) due to an accident-insurance-focused business portfolio, in our view.

Meiji Yasuda General has sufficient capital relative to the risk it undertakes. Its regulatory solvency margin ratio was 5,204.7% as of Dec. 31, 2016. This is primarily because of the following: Japanese government bonds account for a significant portion of its invested assets, limiting investment risk; exposure to natural catastrophe risk is limited, reflecting its business composition; and it maintains very high levels of capital. It has little need to accumulate retained earnings to enhance its capitalization, allowing it to maintain a payout ratio exceeding 80% in recent years.

The stable rating outlook reflects that on Meiji Yasuda Life. The outlook also incorporates our view that Meiji Yasuda General will maintain its core status within the Meiji Yasuda Life group.

We will consider downgrading Meiji Yasuda General if we downgrade Meiji Yasuda Life in the next two years. Conversely, we will consider upgrading Meiji Yasuda General if we upgrade Meiji Yasuda Life in the next two years.

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