NU Online News Service, Dec. 6, 1:52 p.m. – Standard & Poor’s, New York, says the Japanese life insurance industry looks even weaker now than it did a year ago, because of weak sales, higher policy lapse rates and low earnings on investments.
“The outlook for the life insurance industry will continue to be negative for the foreseeable future,” S&P analysts warn in a report on life industry financial results for the first half of the Japanese fiscal year, which ended Sept. 30. “The capital adequacy of some insurers has become a critical issue.”
Japanese life insurers are struggling because Japanese bonds pay low rates, and a key Japanese stock index, the Nikkei Index, fell 25% between March 31 and Sept. 30.
Japanese accounting rules now require life insurers to use current stock prices, rather than purchase prices, when preparing asset totals for balance sheets.
Because Japanese life insurers invest heavily in stocks, and stock prices are down so much, the total reported value of unrealized stock gains in life insurer portfolios fell to the equivalent of $25 billion Sept. 30, from $60 billion March 31.
Meanwhile, the analysts write, sales of new policies are down 2.1% at the 10 biggest life insurers, and the amount of business in force is down 1.6%.
Nevertheless, in spite of the tough times, “some insurers reported solid growth in new business as well as business in force,” the S&P analysts write.
The successful Japanese life insurers have focused on key target markets and maintained strong capital levels, the analysts report.