S&P puts Sumitomo Life notes on watch

S&P said it placed its A- issue credit ratings on Sumitomo Life Insurance Co.’s U.S. dollar-denominated subordinated bonds on CreditWatch with negative implications.

The negative watch reflects the increasing possibility of a mandatory deferral of interest payments on the subordinated notes. “This deferral would be triggered by the insurer booking a regulatory solvency margin ratio of less than 200%. This ratio at the insurer dropped significantly from 794.6% on a consolidated basis at the end of March 2022 to 545.9% at the end of September 2022. The fall was primarily because of a decline in unrealized gains on securities,” the agency said in a press release.

S&P said it aims to resolve the negative watch within three months.

“We will do so after reviewing the company's target solvency margin ratio, the measures the company will take to restore it, and our expectations for the ratio based on market conditions. If we believe the ratio will decline further and remain at a lower level, we will likely downgrade the issue ratings on the insurer's dollar-denominated subordinated notes by one notch,” S&P said.

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