T&D Insurance Group is strengthening its capital base by expanding underwriting profits and reducing exposure to market risk, says S&P Global Ratings (S&P) in a new report.
The Group's domestic life insurance subsidiaries are generating stable insurance underwriting profits through new business acquisitions that have had a favourable impact on performance.
Capital
The Group is also strengthening its capital to prepare for the new economic solvency regime that will be implemented from end-fiscal year 2025, says the report. It has been gradually reducing market risk, notably interest rate risk of the subsidiary Daido Life Insurance and equity risk related to strategically held stocks.
S&P believes stable profit generation and reduction of market risk will have a positive impact on capital and assume the Group's capital will likely stay near the 99.99% confidence level under S&P’s capital model.
There are some factors that could offset the capital improvement. S&P forecasts that the Group may conduct about JPY150bn ($986m) strategic investments based on its strategy through to fiscal 2025 (ending 31 March 2026) and gradually increase shareholder returns in the next two-three years. In addition, the Group intends to gradually increase alternative asset investments, which could partially offset the merits of the reduction of strategically held equities.
Daido Life and Taiyo Life
S&P has revised to ‘Positive’ from ‘Stable’ the outlooks on its financial strength and long-term issuer credit ratings on Daido Life and Taiyo Life, two core subsidiaries of the T&D Insurance Group. At the same time, S&P affirms its 'A' ratings on the insurers.
The positive outlook reflects S&P’s view that T&D Insurance Group will further strengthen its capital base in the next two years. This also incorporates S&P’s view that the group's subsidiaries will maintain strong competitive positions in their target markets.
Favourable financial market conditions, such as high equity prices and rising interest rates in Japan, are also supportive.