A.M. Best has affirmed the financial strength rating of A+ (Superior) and the issuer credit rating of “aa-” of Meiji Yasuda Life Insurance Company (Meiji Yasuda) (Japan). The outlook for both ratings is stable.

The ratings reflect Meiji Yasuda’s strong risk-adjusted capitalization, favorable operating performance and strong business profile.

Meiji Yasuda’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains supportive of the current ratings. Meiji Yasuda’s risk management framework also makes extensive use of stress tests to cope with volatility in the financial market, which also is demonstrated in the company’s ability to maintain a favorable capitalization in a stressed scenario.

Meiji Yasuda has continued to generate increasing core profits over the past five years owing to a widening interest margin spread. Despite the low interest rate environment, the company has managed to improve investment yield while decreasing the credited interest rate.

In July 2015, the company announced the acquisition of StanCorp Financial Group Inc., a U.S.-based life insurer whose strength is group life insurance. The immediate impact on Meiji Yasuda’s risk-adjusted capitalization is limited while there is an improvement on diversification in terms of geography and business mix.

Partially offsetting rating factors are Meiji Yasuda’s exposure to equity volatility and interest rate risk amid a declining population and intensifying market competition, especially in the third sector. Negative rating action could occur if there is a significant deterioration in the company’s capitalization, a downward trend in the company’s operating performance or a sharp decrease in the company’s liquidity levels.

Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.

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