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TEXT-Fitch affirms Dai-ichi Life at IFS 'A'; outlook stable

(The following statement was released by the rating agency)

Oct 10 - Fitch Ratings has affirmed The Dai-ichi Life InsuranceCompany Limited's (Dai-ichi Life) Insurer Financial Strength (IFS) Rating at 'A'and its Long-Term Issuer Default Rating (IDR) at 'A-'. The Outlook is Stable.Simultaneously, the agency has affirmed Dai-ichi Life's USD500m subordinatednotes due 17 March 2014 at 'BBB+'.

The ratings reflect Dai-ichi Life's overall stable life insurance underwritingand adequate capitalisation. The company's surrender and lapse rate was stableat 4.69% at end-March 2012 and remains the lowest among domestic peers. Effortsto further reduce its domestic equity holdings have helped improve its newstatutory solvency margin ratio (SMR), despite a weak domestic equity market, to575.9% at end-March 2012 from 547.7% at end-March 2011.

Dai-ichi Life's annual in-force premium from the profitable third (health)sector grew 1.7% for the financial year ended March 2012. Fitch estimates thatthe health sector represents about half of Dai-ichi Life's total insuranceunderwriting profit. The agency expects Dai-ichi Life's profits to continue togrow, supported by the health sector and by the company's growing internationalbusiness. The company's negative spread burden remains sizable mainly due topersistently low bond yields in Japan. However, Fitch believes that the spreadburden is likely to gradually narrow on sustained reduction of the averageguaranteed yield.

In anticipation of the introduction of Japan's local statutory SMR based oneconomic value, Dai-ichi Life is strengthening its enterprise risk managementand reducing the duration mismatch between assets and liabilities. It is alsosteadily reducing its domestic equity holdings by book value to JPY1,675bn atend-March 2012 from JPY1,916bn at end-March 2011 and exposure to Europeanperipheral countries to JPY107bn at end-March 2012 from about JPY160bn atend-September 2011.

Key positive rating triggers include a further strengthening of capitaladequacy, with sustained improvement in Fitch's internal risk-basedcapitalisation. Earnings growth arising from the currently profitable healthsector and successful expansion of international operations would also bepositive for ratings.

Key negative rating triggers include material erosion of capitalisation,deterioration in profitability and volatility in the embedded value.Specifically, negative rating action may result from Fitch's internalcapitalisation measure falling sharply, or the SMR declining below 500% for aprolonged period.

Dai-ichi Life is the second-largest life insurance company in Japan with amarket share of 16.6% by policies in force at end-March 2012.

((Bangalore Ratings Team, Hotline: +91 80 41355898, Bhanu.priya@thomsonreuters.com,Group id: BangaloreRatings@thomsonreuters.com,Reuters Messaging: Bhanu.Priya.reuters.com@reuters.net))

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