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Japan's Insurers Work To Reverse Slow Declines, Report Says

TOKYO (S&P Global Ratings) June 29, 2023--Earnings of Japan-based insurers we rate dropped significantly in fiscal 2022 (ended March 31, 2023). This was largely in line with our expectations.

That's according to a report S&P Global Ratings published today, titled "Japan's Insurers Work To Reverse Their Slow Declines."

"Total unconsolidated core profit of Japan's four major life insurers fell 30%, based on a comparison using a new calculation method for core profit applied from fiscal 2022," said S&P Global Ratings credit analyst Toshiko Sekine. "Meanwhile, consolidated net income of three major non-life insurance groups fell 31%, or about 45% when adjusted for various reserves that are substantive sources of accumulated earnings."

The four major life insurers we rate are Nippon Life Insurance Co., The Dai-ichi Life Insurance Co. Ltd., Sumitomo Life Insurance Co., and Meiji Yasuda Life Insurance Co. The three major non-life insurance groups we rate are Tokio Marine Group, MS&AD Insurance Group, and Sompo Holdings Group.

Key findings of the report include:

  • Pandemic-related payments and persistently high costs of currency hedging lowered aggregate profits at Japan's major life insurers and non-life insurance groups in fiscal 2022.
  • Major life insurers need to strengthen profitability because of weakened underwriting profit, even after excluding the impact of COVID-related payments, and continue to face high hedging costs.
  • Major non-life groups must control natural catastrophe risk and diversify revenue sources; overseas business has underpinned total consolidated net income while domestic non-life and life insurance income has fallen.
  • We expect insurers to reduce market risk ahead of new solvency regulations so as to maintain or improve economic solvency ratios; listed insurers face pressure to step up business investment and shareholder returns.

This report does not constitute a rating action.

The report is available to subscribers of RatingsDirect at www.capitaliq.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to research_request@spglobal.com. Ratings information can also be found on S&P Global Ratings' public website by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.

Primary Credit Analyst:Toshiko Sekine, Tokyo + 81 3 4550 8720;
toshiko.sekine@spglobal.com
Secondary Contacts:Toshihiro Matsuo, Tokyo + 81 3 4550 8225;
toshihiro.matsuo@spglobal.com
Koshiro Emura, Tokyo (81) 3-4550-8307;
koshiro.emura@spglobal.com

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