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Rating Action:

Moody's takes action on three US life insurance companies owned by Japanese insurers

03 Oct 2017

New York, October 03, 2017 -- Moody's Investors Service (Moody's) has taken rating actions on three US life insurance subsidiaries owned by Japanese insurance groups. As part of this action, Moody's upgraded the insurance financial strength (IFS) ratings of the life insurance subsidiaries of Protective Life Corporation (Protective, senior debt Baa1 stable) to A1 from A2; the IFS rating of Standard Insurance Company (Standard) to A1 from A2; and the IFS rating of Symetra Life Insurance Company (Symetra Life) to A1 from A2. Moody's also affirmed the Baa1 senior unsecured debt ratings of Protective, the Baa1 senior unsecured debt ratings of StanCorp Financial Group, Inc. (StanCorp), and the Baa1 senior unsecured debt ratings of Symetra Financial Corporation (Symetra). The outlook on all ratings for these insurers is stable. A complete list of rating actions can be found below.

RATINGS RATIONALE

The rating upgrades of Standard and Symetra Life reflect Moody's view that the respective companies are increasingly strategically important to their parent groups, driven by these groups desire to grow their international operations and diversify outside of the domestic Japanese life insurance market. As such, the subsidiary IFS ratings now incorporate one notch of rating uplift, reflecting Moody's expectation of implicit support from their respective parents. While Protective's insurance subsidiaries benefit from similar implicit support, its rating upgrade reflects improvements in its stand-alone credit profile. Protective is owned by Dai-ichi Life Holdings (Dai-ichi Holdings, unrated), which is also the parent of Dai-ichi Life Insurance Company, Limited (Dai-ichi Life, A1 IFS, stable). StanCorp is a wholly owned subsidiary of Meiji Yasuda Life Insurance Company (Meiji Yasuda, A1 IFS stable). Symetra is a wholly owned subsidiary of Sumitomo Life Insurance Company (Sumitomo, A1 IFS stable).

INSURANCE COMPANY RATINGS

Protective

The IFS ratings upgrade is based on Protective's improvement in its credit profile, particularly its improving liability profile, diverse profitability and sound capital adequacy. The company has made significant progress in improving its liability mix, which has been achieved by growing its retail life insurance business, as well as continued success in making small to mid-sized acquisitions of other insurance companies and block of businesses. This, together with an operating company consolidated NAIC company action level (CAL) risk-based capital (RBC) ratio of 619% (year-end 2016) and healthy financial flexibility at Dai-ichi Holdings drove the upgrade. The rating also reflects the benefit of the aforementioned implicit parental support, which is in line with the A1 standalone credit profile. Protective, which was acquired by Dai-ichi Life in February 2015, has increased its strategic importance to Dai-ichi Holdings over time, with Protective's net income representing 20% of the group's overall net income for the year-ending March 31, 2017.

These strengths are tempered by the relatively small, but growing, variable annuity business and moderate credit exposure to reinsurers. The company's asset protection segment is cyclical and expected to fluctuate with the strength of the economy. In addition, the utilization of captive financing solutions to fund redundant reserves somewhat diminishes the quality of capital at the operating company.

StanCorp

StanCorp was acquired by Meiji Yasuda in March 2016, and is a core element of Meiji Yasuda's growth strategy in the US. StanCorp accounts for 8% of Meiji Yasuda's consolidated premiums and 8% of total assets as of the year-ending March 31, 2017. As a result, Standard's A1 IFS rating reflects the benefit of one notch of implicit parental support relative to its A2 standalone credit profile. The standalone credit profile is based on the company's strong competitive position in the US group life and disability (long-term and short-term) insurance markets, good capitalization and strong financial resources of its ultimate parent, Meiji Yasuda. The rating agency commented that offsetting these strengths is the long-tail risk and volatility arising from long-term disability insurance, a key product offering of Standard. In addition, the company's profitability and investment returns are vulnerable to changes in the economic cycle because of StanCorp's concentration in disability insurance and significant investment in commercial mortgage loans (CML), which represented 40% of total cash and investments as of June 30, 2017.

Symetra

Symetra was acquired by Sumitomo Life in February 2016, and is the core element of Sumitomo Life's growth strategy in the US. Symetra accounts for 16% of Sumitomo Life group premiums and 13% of assets as of year-end 2016, and Sumitomo Life has committed to supporting Symetra's strategic plans to achieve 'National Player' status in the divisions in which it operates. As a result, Symetra Life's A1 IFS rating reflects one notch of implicit parental support relative to its A2 standalone credit profile. The standalone credit profile reflects its strong capitalization, consistent and good profitability, and strong financial resources of its ultimate parent, Sumitomo Life. The rating is also supported by Symetra Life's strong asset quality and relatively stable liability profile. Moody's noted that Symetra Life is a consistent leader in the bank-distributed fixed annuity market and medical-stop loss insurance and has improved its market position with the establishment of a good presence in the fixed indexed annuity market over the past few years. The rating agency commented that offsetting these strengths are the high interest-sensitive nature of Symetra Life's liabilities, including deferred annuities and structured settlements. The company faces continued pressure from spread compression and reinvestment risk in the persistently low US interest rate environment.

HOLDING COMPANY RATINGS

Moody's affirmed the holding company senior unsecured debt ratings of Baa1 for all three companies. The senior debt rating in each case is now three notches lower than the IFS rating of the operating subsidiaries, which is typical for US holding companies.

RATING DRIVERS

Protective

Moody's said that there is unlikely to be upward pressure on the ratings in the short term, however the following factors could place upward pressure on the ratings of Protective and Protective Life: (1) an upgrade of Dai-ichi Life's IFS rating and explicit support from Dai-ichi Life; (2) return on capital (ROC) consistently over 8%; (3) sustained growth in the sale of protection oriented products and increasing market share in US insurance; and (4) less reliance on redundant reserve type solutions to finance future reserves.

Conversely, the following could place downward pressure on the ratings of Protective and Protective Life: (1) a downgrade of Dai-ichi Life's IFS rating; (2) NAIC CAL RBC ratio below 375% or a decline in organic statutory capital generation in any given year; or (3) ROC less than 6%.

StanCorp

Moody's said that there is unlikely to be upward pressure on the ratings in the short term, however the following factors could place upward pressure on the ratings of StanCorp and Standard: (1) an upgrade of Meiji Yasuda's IFS rating and explicit support from Meiji Yasuda; (2) NAIC CAL RBC ratio consistently over 400%; (3) employee benefit loss ratio consistently below 75%; and (4) a material decline in concentration in CML to be consistent with the industry average.

Conversely, the following could place downward pressure on the ratings of StanCorp and Standard: (1) a downgrade of Meiji Yasuda's IFS rating or diminished implicit support; (2) employee benefit loss ratio consistently over 85%; (3) increasing concentration in CML's above 40%; or (4) NAIC CAL RBC ratio of less than 350%.

Symetra

Moody's said that there is unlikely to be upward pressure on the ratings in the short term, however the following factors could place upward pressure on the ratings of Symetra and Symetra Life: (1) an upgrade of Sumitomo's IFS rating and explicit support from Sumitomo; and/or (2) ROC consistently above 6%.

Conversely, the following could place downward pressure on the ratings of Symetra and Symetra Life: (1) a downgrade of Sumitomo's IFS rating or diminished implicit support; (2) failure to maintain profitability while growing sales in new markets; (3) ROC falls below 4%; or (4) NAIC CAL RBC ratio below 350%.

The following ratings have been upgraded:

Protective Life Insurance Company:

Insurance financial strength to A1 from A2.

MONY Life Insurance Company:

Insurance financial strength to A1 from A2;

Surplus notes to A3(hyb) from Baa1(hyb).

West Coast Life Insurance Company:

Insurance financial strength to A1 from A2.

Protective Life Global Funding:

Senior secured (domestic currency) to A1 from A2;

Senior secured (foreign currency) to A1 from A2;

Senior secured MTN to (P)A1 from (P)A2.

Standard Insurance Company:

Insurance financial strength to A1 from A2.

Symetra Life Insurance Company:

Insurance financial strength to A1 from A2.

The following ratings have been affirmed:

Protective Life Corporation:

Senior unsecured debt at Baa1;

Senior unsecured MTN at (P)Baa1;

Subordinate notes at Baa2(hyb).

Protective Life Insurance Company:

Short-term insurance financial strength at Prime-1.

StanCorp Financial Group, Inc.:

Senior unsecured debt at Baa1;

Junior subordinated notes at Baa2(hyb).

Symetra Life Insurance Company:

Short-term insurance financial strength at Prime-1.

Symetra Financial Corporation:

Senior unsecured debt at Baa1;

Junior subordinated notes at Baa2(hyb);

Senior unsecured shelf at (P)Baa1;

Subordinated shelf at (P)Baa2;

Junior subordinated shelf at (P)Baa2;

Preferred shelf at (P)Baa3.

The outlook for all of the ratings is stable.

Protective Life Corporation is a life insurance holding company headquartered in Birmingham, Alabama. At June 30, 2017, Protective reported consolidated GAAP assets of approximately $77 billion and consolidated GAAP shareholders' equity of $5.9 billion.

StanCorp Financial Group, Inc., headquartered in Portland, Oregon, reported GAAP total assets of about $29.3 billion and consolidated GAAP shareholders' equity of approximately $5.1 billion as of June 30, 2017.

Symetra Financial Corporation is a Bellevue, Washington-based company that sells insurance and related financial products. At June 30, 2017, it reported consolidated GAAP assets of approximately $42 billion and consolidated GAAP shareholders' equity of about $3.9 billion.

The principal methodology used in these ratings was Global Life Insurers published in April 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay punctually senior policyholder claims and obligations.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Manoj Jethani
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Marc R. Pinto, CFA
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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