Tokyo-based T&D Holdings Inc.'s three-year plan to focus oninsurance sales to the senior population is an apt survival strategy in Japan'saging society in the short term, but the life insurer may ultimately need toexpand overseas to grow amid tough competition in a shrinking domestic market,according to analysts.
T&D Holdings, the sixth biggest domestic life insurer inJapan, plans to grow business by selling third-sector insurance products —medical, cancer, nursing care and disability — to seniors. Each of the group'sthree units — Daido LifeInsurance Co., TaiyoLife Insurance Co. and T&D Financial Life Insurance Co. — targets nichemarkets with specialized sales channels.
The group is shifting its focus to the "seniormarket" since Japan's aged population is increasing even as its overallpopulation declines, Takahisa Suguro, deputy section chief of the group'spublic relations department, said in an interview. Japan's National Instituteof Population and Social Security Research forecasts that the country's over-65population will increase to 39.9% of its total population by 2060 from 27.5% in2016.
Under the three-year plan that started in April, Daido Lifeis seeking to grow new business in value for disability and nursing careinsurance to ¥1 trillion in the fiscal year ending March 31, 2019, from ¥786.6billion in the year ended March 31. The figure excludes the insurer's targetfor the larger third sector. Taiyo Life plans to specialize in selling medicalinsurance and nursing care insurance. The insurer started offering two types ofAlzheimer products in March and has sold about 70,000 polices by the end ofJune.
The plan, according to analysts, makes sense in the shortterm but may not work in the longer term due to the country's decliningpopulation as well as increasing competition in the senior market.
The biggest hurdle for T&D Holdings to continue growingin the niche markets is the country's declining population, according to TerukiMorinaga, an insurance analyst at Fitch Ratings in Tokyo.
"T&D's domestic business is growing, unlike thoseof the top four Japanese life insurance companies, because the group istargeting the niche markets," Morinaga told S&P Global MarketIntelligence. "But I am not sure how long they will be able to grow sincethe population in Japan is declining."
David Threadgold, managing director and insurance andbanking analyst at Keefe Bruyette & Woods, said the group's approach isgood for now because people will likely buy insurance in an aging society likeJapan.
"People would buy sickness and nursing care insurance,but they won't buy term insurance," Threadgold said, adding that terminsurance would only appeal if it offers tax or inheritance advantages.
At the same time, the group will face competition in theniche markets from other Japanese players like and Aflac,according to Reina Tanaka, director and lead analyst at Standard & Poor'sRatings Japan K.K.
One option for T&D Holdings would be to acquire overseasinsurers and expand outside Japan.
"I think they can grow up to several years in thedomestic market, but in the longer term they may have to consider overseasM&As," Fitch Ratings' Morinaga said.
While Suguro said the group has no specific expansion plans,he did not completely rule it out. "We have been researching overseasM&As, though we are not considering any specific M&A targets," hesaid.
As of Sept. 30, US$1was equivalent to ¥101.24.