TOKYO -- Top Japanese life insurers sustained an estimated 16% decline in combined domestic premium income in the fiscal year ended March, as the Bank of Japan's negative interest rate policy weighed on their investment income.
The four biggest players -- Dai-ichi Life Holdings, Nippon Life Insurance, Meiji Yasuda Life Insurance and Sumitomo Life Insurance -- likely generated a combined 14.7 trillion yen ($131 billion) or so in insurance premiums in Japan in fiscal 2016. That represents a roughly 2.7 trillion yen plunge from a year earlier, the sharpest drop since after the 2008 global financial crisis.
At Dai-ichi Life, aggregate premium income in Japan for its three life insurance units slumped by more than 1 trillion yen, according to its earnings statement, released on May 15. Nippon Life, Japan's No. 1 life insurance company, apparently suffered a similar downturn, which would amount to the worst year-on-year hit in the company's history.
As market interest rates fell after the BOJ adopted negative rates, life insurers were forced to raise premiums or halt sales of lump-sum whole life insurance policies. Sales of various policies via bank counters and through sales agents also decreased. But weaker sales were due in part to insurance companies' strategic decisions to reduce offerings. Consequently, base profits, which indicate earnings from their main operations, are believed to have grown at Meiji Yasuda and possibly at others.
Looking to the current year, both Dai-ichi and Nippon Life have decided to keep dividends for individual policyholders unchanged from fiscal 2016. Sumitomo Life will lower dividends for endowment insurance and personal annuities, but raise payouts for term insurance and other policies. Meiji Yasuda will hike dividends for the first time in two years.
To make up for weaker domestic sales, Japanese life insurers are focusing on expanding their overseas businesses. Nippon Life's new medium-term business plan, which was unveiled just last month, calls for investments of 1.5 trillion yen in growth areas, including opportunities outside Japan. At Dai-ichi, past overseas business acquisitions helped the company achieve its sixth consecutive year of record profit.