Japanese life insurers on track to achieve fiscal 2023 profit forecasts

The three largest Japanese life insurers are on track to achieve their annual profit forecasts for the fiscal year ended March 31, 2024, amid a continued decline in COVID-19 costs, according to an analysis by S&P Global Market Intelligence.

Dai-ichi Life Holdings Inc.'s net income attributable to shareholders for the nine months ended Dec. 31, 2023, stood at ¥217.95 billion, up from ¥153.39 billion a year ago. The insurer said it achieved 80% of its profit forecast of ¥273.0 billion for fiscal year 2023 during the period.

The company attributed the 42.1% year-over-year growth in net income to positive factors such as Dai-ichi Life Reinsurance Bermuda Ltd.'s asset and liability valuation adjustments, which exceeded negative factors such as goodwill amortization, and an increase in group adjusted profit. Dai-ichi Life's group adjusted profit increased 30% year over year to ¥214.6 billion from ¥165.4 billion.

T&D Holdings Inc. booked profit attributable to owners of the parent of ¥64.81 billion, compared with a loss of ¥167.59 billion in the same nine-month period in fiscal year 2022. The company reported a progress rate of 74.5% toward its full-year profit forecast of ¥87.0 billion for fiscal 2023. The improvement in T&D Holdings' nine-month profit was largely due to a "reactionary decline" in large temporary valuation losses related to Fortitude, a foreign reinsurance affiliated company, as a result of interest rate increases in the US.

Group adjusted profit, on the other hand, fell to ¥70.4 billion from ¥84.3 billion a year ago. T&D Holdings attributed the decline to a decrease in capital gains in its domestic life insurance business and an increase in insurance reserves related to a closed book business at Fortitude.

Japan Post Insurance Co. Ltd. posted a nine-month net income attributable to the company of ¥65.15 billion, down 14.5% year over year from ¥76.20 billion. As of Dec. 31, 2023, the company achieved 90.5% of its full-year profit forecast of ¥72.0 billion for fiscal 2023.

The decline was driven by Japan Post's continued adoption of accounting treatments to provide or reserve for price fluctuations corresponding to capital gains or losses and foreign exchange-related hedging costs, which neutralized the substantial improvement in capital gains.

Continued decrease in COVID-19 claims

T&D Holdings recorded a substantial decline in claims related to COVID-19 during the nine-month period. The company reported 9,996 hospital benefit claims and 312 death benefit claims, compared with 225,118 hospital benefit claims and 434 death benefit claims in the prior-year period. The combined payments for hospital and death benefit claims totaled ¥2.36 billion as of Dec. 31, 2023.

The decrease in payments for costs related to COVID-19 was the main driver for the growth in core profit at T&D Holdings' domestic life insurance business, comprising Taiyo Life Insurance Co., Daido Life Insurance Co. and T&D Financial Life Insurance Co. Core profit for the business climbed 14.9% year over year to ¥80.1 billion from ¥69.7 billion despite an increase in currency hedging costs.

– Read about the largest Asia-Pacific insurers by market cap in Q4 2023. – Use S&P Capital IQ Pro's screener to access earnings data. – Subscribe to our weekly recap of Asia-Pacific insurance stories.

Japan Post similarly saw a significant fall in insurance claims related to the disease during the period. Death benefit claims declined to 3,922 from 15,257 in the nine months ended Dec. 31, 2022, while hospitalization benefit claims declined to 103,571 from about 1.49 million in the prior-year period. The combined insurance payments for death and hospitalization benefit claims reached ¥16.6 billion during the period, including ¥1.9 billion of claims from the fiscal third quarter.

The decline in insurance claims payments for COVID-19 also led to an increase in core profit at Japan Post. The decrease in insurance claims payments, mainly due to the absence of an impact from COVID-19, contributed ¥84.6 billion of positive impact to core profit. Japan Post's nine-month core profit jumped year over year to ¥169.7 billion from ¥134.9 billion.

While Dai-ichi Life did not disclose specific figures, the company said the absence of payments related to COVID-19 led to an improvement in gains from core insurance activities. In turn, this improvement led to a ¥72.1 billion increase in fundamental profit during the period. Gains from core insurance activities rose year over year to ¥206.7 billion from ¥102.9 billion in the nine-month period, while fundamental profit increased to ¥223.1 billion from ¥150.9 billion.

New business performance continues to recover

Dai-ichi Life CFO Taisuke Nishimura said the major factor affecting new business performance had not changed. The group's annualized new premiums (ANP) from new business rose 26.1% to ¥378.2 billion from ¥300.0 billion in the prior-year period. Excluding the impact of foreign exchange, new business ANP grew 25.1% year over year.

The Dai-ichi Frontier Life Insurance Co. Ltd. was the biggest contributor across the group, recording ¥240.7 billion of new business ANP during the period. Dai-ichi Frontier Life maintained high sales volume, particularly for US dollar-denominated products that benefit from high interest rates, and saw steady sales of Japanese yen-denominated products.

T&D Holdings' domestic life insurance business logged ANP from new business of ¥152.0 billion, up 28.7% year over year from ¥118.1 billion, driven by an increase in the sales of single-premium life insurance products. T&D Financial Life was the biggest contributor within the business, booking ¥70.4 billion of new business ANP during the nine months ended Dec. 31, 2023.

Japan Post's ANP from new policies for individual insurance also continued to recover, rising 32.9% year over year to ¥65.9 billion. Including individual annuities, ANP from new policies grew year over year to ¥66.1 billion from ¥49.6 billion.