Underwriting earnings key for Japan’s life insurers, says Fitch

May 30 2016 by InsuranceAsia News Staff

Stable earnings from insurance underwriting have kept life insurance companies in Japan resilient despite the current low-yield environment in the country, Fitch Ratings has reported.

Despite declining bond yields in Japanese yen fixed-income markets, life companies in the country are maintaining their strong profitability due to the fat margins from profitable protection-type insurance products.

These products include term life and the third (health) sector.

For the financial year ended March 2016, the core profit of nine insurers rated by Fitch remained high at ¥2.240 trillion (US$20.4 billion), from ¥2.410 trillion last year.

Fitch added that underwriting fundamentals of the nine companies remain stable as surrender and lapse rates continue to improve on the back of beefed-up sales forces.

Their statutory solvency margin ratio also remained high at 917%, from 957% at end-March 2015.

Fitch said the negative interest rates adopted by the Bank of Japan in January will continue to be an unfavourable development for life insurers especially now that most of them are still in the process of extending bond portfolios’ duration.