Japanese life insurers poised for earnings growth

Though other insurers have weaker profiles due to smaller operations, business diversification

Japan’s life insurers are expected to keep their overall strong capital adequacy for a while, supported by accumulated capital through hybrid debt issuance and significant unrealized gains on securities, Fitch Rating said.

Unlike in regions like the US and UK, there is less investor pressure in Japan for share buybacks and dividends, allowing insurers to build excess capital.

Fitch Ratings noted a wide range in the company profiles of Japanese life insurers. Dai-ichi Life stands out with a highly diversified global business, classifying it among the major global life insurers. 

In contrast, other insurers have weaker profiles due to smaller operations and limited business diversification.

Earnings for Japanese life insurers are expected to grow, driven by a recovery in underwriting profitability to pre-pandemic levels as mortality and morbidity losses from COVID-19 decreased substantially by March 2024. 

The change in Japan's "deemed hospitalisation" rule in May 2023 has also reduced related insurance payments, while a steadily declining average guaranteed yield supports a solid investment spread.