[January 18, 2013]

A.M. Best Affirms Ratings of Nippon Life Insurance Company and Nippon Life Insurance Company of America

A.M. Best Asia-Pacific Limited has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit rating (ICR) of "aa-" of Nippon Life Insurance Company (Nissay) (Japan). Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of "a-" of Nissay's subsidiary, Nippon Life Insurance Company of America (Nippon Life Benefits or NLB) (Des Moines, IA). The outlook for all ratings is stable.

The ratings reflect Nissay's adequate capitalization level, improving operating performance and diversified distribution channels. Nissay strengthened its capitalization in fiscal year 2011 with an increase in its foundation fund by JPY 100 billion to JPY 1,250 billion, in addition to a significant increase in its unrealized gains on its bond portfolio. As a result, the company's regulatory solvency margin improved from 529% to 567% at the end of March 2012. Nissay reported the first upturn in its in-force annualized premium since fiscal year 2004, underpinned by growth in new sales of individual protection and annuity products as well as improvement in its persistency. In addition, Nissay's core operating profits increased by 5.4% year on year to JPY 544 billion in fiscal year 2011, with increases in all components of mortality, interest and expense margins. The restructuring in the cost structure of personnel and IT systems and an additional amount to the policy reserves, which had been accumulated over five years, since the year ended March 31, 2007 also boosted the company's margins.

The continued low levels of interest rates could weigh on Nissay's investment returns given the large proportion of fixed income assets in its investment portfolio.

Partially offsetting these positive rating factors are the persistently low interest rate environment and Nissay's high exposure to the fluctuating stock market.

Positive ratings actions could occur if Nissay shows a significant improvement in its risk capitalization and/or operating performance. Conversely, negative rating actions may occur if there is material deterioration in the company's risk-adjusted capital position and/or operating performance.

The rating affirmations for NLB reflect the operational and financial support it receives from Nissay, its continued favorable financial results, established niche in the U.S. Asian (Japanese and Korean) markets and its solid risk-adjusted capital position. Additionally, NLB successfully completed the transition of its business to CoreSource to administer and pay its claims. However, NLB has a concentration in the competitive and volatile group medical market, combined with the challenges of the health care reform legislation.

NLB primarily markets group medical products to the U.S. operations of Japanese companies as well as other companies in the United States. In 2009, NLB started marketing products to the U.S. operations of the South Korean companies and this business has maintained continued growth.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Rating Members of Insurance Groups"; "Understanding Universal BCAR"; and "Evaluating Country Risk." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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