Fitch Affirms Dai-ichi Life's IFS Rating at 'AA-'; Outlook Stable

Fitch Ratings has affirmed Japan-based The Dai-ichi Life Insurance Company, Limited's Insurer Financial Strength (IFS) Rating at 'AA-' (Very Strong), Long Term Issuer Default Rating (IDR) at 'A+' and US dollar-denominated subordinated notes at 'A'.

Fitch has simultaneously affirmed the IFS Rating on another subsidiary of Dai-ichi Life Holdings Inc., Dai-ichi Life Reinsurance Bermuda Ltd. (Dai-ichi Life Re), at 'AA-'. The Outlook is Stable.

The ratings and Outlook take into account the group's 'Most Favourable' company profile, 'Very Strong' capitalisation and 'Very Strong' profitability, driven by a focus on profitable products, such as domestic third-sector (health) insurance.

Key Rating Drivers

'Very Strong' Capitalisation: Dai-ichi Life group's consolidated capital adequacy, as measured by the Fitch Prism Global Model, remained well within the 'Very Strong' category as at the financial year ending March 2025 (FYE25), supported partly by accumulated core capital. The consolidated economic solvency ratio (ESR) was a robust 218% at end-September 2025, up from 210% at FYE25.

'Very Strong' Profitability: We expect the group to maintain strong profitability, driven by a rising positive investment spread on steadily declining average guaranteed yields. Positive investment spread reached JPY61 billion in 1HFYE26, from JPY49 billion a year earlier. The core profit margin remained high, at 14%, down slightly from 15%. Dai-ichi Life is reinforcing its domestic sales force to further strengthen profitability in its life insurance business.

Falling Exposure to Risky Assets: We expect further improvement in the consolidated risky-asset ratio beyond the 106% recorded at FYE25, as the insurer has committed to more than halving its equity risk exposure over the next five years. This should make the group's financial market risk more manageable than that of most peers. While the group has some exposure to US commercial real estate through its US life insurance subsidiary, we consider these risks manageable relative to the group's annual earnings and capital buffer.

High Concentration in Sovereign Securities: The group's high concentration in Japanese sovereign (A/Stable) securities tempers our assessment of its investment and asset risks. We estimate that consolidated sovereign investments relative to capital exceeded 300% at FYE25.

Successful Global Expansion: We expect the group's international businesses to continue expanding, supported by sustainable organic growth and M&A activity at US-based subsidiary, Protective Life Corporation (IDR: A/Stable; IFS Rating of its primary life insurance subsidiary, Protective Life Insurance Company: AA-/Stable). Over 30% of Dai-ichi Life group's consolidated in-force annualised premiums and about 25% of group-adjusted profit came from outside Japan in 6MFYE26. This is higher than for other domestic life insurers.

Core Captive Business on Track: We believe Dai-ichi Life Re, a core captive business of the group, has been managed appropriately as planned. Dai-ichi Life Holdings continues to transfer risks from the capital intensive businesses at its domestic subsidiary, The Dai-ichi Frontier Life Insurance Co., Ltd, to Dai-ichi Life Re. We believe Dai-ichi Life Re's contribution to more efficient group capital management is rising in importance. The company's local solvency ratio of nearly 200% at end-June 2025 was well above Bermuda's regulatory capital requirement.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

A significant decline in the capital buffer; specifically, if Dai-ichi Life group's Fitch Prism Global Model score drops to 'Strong' for a sustained period.

A decline in profitability; specifically, a decline in Dai-ichi Life's core profit margin to below 9% and pre-tax return on assets to below 0.6% (FYE25: 1.3%) for a sustained period.

A substantial decline in the embedded value of Dai-ichi Life and Dai-ichi Life group for a prolonged period.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

A decrease in investment and asset risk; specifically, if Dai-ichi Life group's consolidated risky assets ratio improves to below 75% and consolidated sovereign investments/capital declines to well below 300% for a sustained period.

Stronger group capitalisation, with a Fitch Prism score in the upper range of 'Very Strong' for a sustained period.

Sustainable growth in third-sector business, while maintaining profitability, with Dai-ichi Life's core profit margin at above 11% and pre-tax return on assets of above 1.0% for a sustained period.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/topics/esg/products#esg-relevance-scores

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