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Rating Agency Sees Signs Of Stability In Japan

By Allison Bell

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NU Online News Service, May 19, 2004, 4:40 p.m. EDT – The Japanese life insurance market could be stabilizing.[@@]

Moody’s Investors Service has changed the rating outlook for 7 Japanese life insurers to stable, from negative.

The agency also affirmed the life insurers’ insurance financial strength ratings.

The move affects Asahi Mutual Life Insurance Company, Tokyo; Daido Life Insurance Company, Osaka; Dai-ichi Mutual Life Insurance Company, Tokyo; Fukoku Mutual Life Insurance Company, Tokyo; Mitsui Mutual Life Insurance Company, Tokyo; Sumitomo Life Insurance Company, Osaka; and Taiyo Life Insurance Company, Tokyo.

The ratings affirmed range from a Caa2 rating for Asahi to Baa2 ratings for Daido, Dai-ichi and Taiyo.

Low investment returns and consumer skepticism hit Japanese life insurers hard in the late 1990s. Experts have announced signs of a recovery several times since then, but every time Japanese life insurers seemed to be doing better, local or global problems knocked them back down.

Now, though, analysts in Moody’s Tokyo and Hong Kong offices say they see signs of stabilization in the Japanese life insurers’ operating environment.

The evidence for improvement includes “growing expectations of Japanese economic recovery, improvements in stock prices and proactive steps taken by life insurers to address industry challenges,” according to a comment on the outlook change by Donovan North and Shiyo Imai, 2 Moody’s analysts in Asia.

Japanese life insurers have strengthened their finances by cutting operating expenses, reducing their exposure to financial stock, and changing sales and distribution systems to adapt to the drop in demand for traditional life products, the analysts write.

But the Moody’s analysts warn that Japanese life insurers still face tough competition, low investment returns and the difficulty that any company faces when it enters new markets.