Fitch has maintained Dai-ichi Life’s financial strength rating at “A” and its outlook at stable.

The A rating is also given to Dai-ichi’s $US1.3 billion ($1.7 billion) cumulative perpetual subordinated notes and its $US1 billion ($1.3 billion) cumulative perpetual subordinated notes.

Fitch praises the Japanese life insurer’s strong capital adequacy, recent international expansion and steady growth in the more profitable domestic health sector.

“The consolidated statutory solvency margin ratio remained adequate at 768% at December, but had dropped from 818% at the end of March [last year], due to a fall in unrealised gains on securities,” the ratings agency says.

International earnings, mainly from Australia and the US, now comprise about 20% of Dai-ichi’s total revenue – more than any other Japanese life insurer.

But Fitch sees risks in the duration mismatch between assets and liabilities, and foreign currency exposure amid low interest rates.

“There is also price fluctuation risk in the company’s domestic equity holdings.”

A ratings upgrade is unlikely due to Fitch’s views on the Japanese economy.

“Downgrade rating triggers would include a major erosion of capitalisation, deterioration in profitability and volatility in the embedded value,” the report says.

“Specifically, a downgrade could occur if Dai-ichi Life’s consolidated solvency margin ratio declined below 600%, consolidated financial leverage rose above 25% or its core profit margin declined below 10% for a prolonged period.”