Japanese life insurers’ revenue hit by sharp drop

Negative interest rate policy leads to largest decline since 2008 financial crisis

Japanese life insurers’ revenue hit by sharp drop

Insurance News

By Gabriel Olano

The biggest players in Japan’s life insurance industry have suffered a decline of around 16% in terms of domestic premium income for the fiscal year ended March. The Bank of Japan’s negative interest policy was seen as contributing to the decrease.

The four biggest life insurers in Japan: Dai-ichi Life, Nippon Life, Meiji Yasuda Life, and Sumitomo Life, took in an estimated ¥14.7 trillion (US$131 billion) in Japanese insurance premiums for fiscal 2016. This was a drop of around ¥2.7 trillion, or around 16% from the previous year, the sharpest fall since the 2008 global financial crisis.

Both Dai-ichi Life and Nippon Life have apparently suffered the worst year-on-year decreases in the company’s history.

After the Bank of Japan adopted the negative interest rate policy, life insurers had to raise premiums or stop selling lump-sum whole life insurance policies. Sales via banks and insurance agents also decreased. However, weaker sales were partially due to insurers’ decisions to reduce their product offerings. This led to base profits, which indicate earnings from firms’ main operations, growing at Meiji Yasuda and other insurers.

To compensate for weaker domestic sales, Japanese life insurers are turning to overseas expansion. According to Nippon Life’s medium-term business plans, the company will invest ¥1.5 trillion in various growth areas, including opportunities abroad. As for Dai-ichi, overseas businesses helped it reach record profits for six consecutive years.

Related stories:
Dai-ichi Life records almost 30% jump in net profit
Yield of global bonds has hit rock bottom, says senior insurance exec
Nippon Life to shift investments to overseas projects

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