Mixed core profit reveals Japan top life insurers' disjointed investments

Only Dai-ichi Life posted higher core profit.

Japan’s top four life insurers experienced mixed core profitability in fiscal 2020, reflecting a disunity in their respective investment performances, according to a Moody’s Japan KK report.

Amongst the four, only Dai-ichi Life Insurance posted higher core profit driven to higher investment margins. Meiji Yasuda Life’s core profit declined and Nippon Life’s  was nearly flat despite higher mortality margins. 

Core profits declined at Sumitomo Life as a result of higher expenses.

"Stable mortality margins underpinned the insurers' core profitability – accounting for 60% of core profit and growing 4% in fiscal 2020. These margins will remain supported by the insurers' long-dated policies and conservative pricing in underwriting these policies," says Moody’s senior credit officer Shunsaku Sato.

Core profitability diverged because of the insurers' varying investment performance in fiscal 2020, with Dai-ichi Life reporting a 67% jump in its investment margin while Meiji Yasuda suffering a 9% drop. Much of this volatility reflects large investment income swings as a result of differences in insurers' investment strategies.

Investment performance will continue to be a key differentiator for the insurers' overall profitability, the report noted, given that investment margins accounted for 36% of their core profit in fiscal 2020.