S&P rates Nippon Life notes A-

S&P said it assigned its A- issue rating to the dollar-denominated fixed-term subordinated notes that Nippon Life Insurance Co. plans to sell.

Nippon Life has yet to decide the total offering amount and the coupon rate of the proposed subordinated notes, which have interest deferral features. The coupon will have a fixed rate until January 2030, after which it will be reset every five years. The issue rating on the proposed subordinated notes is two notches lower than the long-term issuer credit rating on Nippon Life. The gap reflects subordination to senior creditors and the issuer’s ability to defer interest payments.

S&P considers Nippon Life’s proposed subordinated notes intermediate equity content based on the following factors: the term to maturity is 30 years, which is sufficiently long under our criteria; redemption is basically not allowed for 10 years from issuance; although the interest rate will be stepped up after 10 years, the step-up of the coupon will be moderate at 100 basis points; the issuer can defer interest payments at its discretion; and the notes’ repayment at the time of subordination events such as liquidation, bankruptcy, reorganization, rehabilitation or other equivalent proceedings is subordinated to other senior debt, including policy obligations.

“Our ratings on Nippon Life and our assessment of the group credit profit of Nippon Life group will not be affected significantly by the issuance of the proposed subordinated notes,” S&P said in a press release.

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