The nation’s major life insurance companies have had little success reversing a decline in business, while their capital remains under pressure by depressed share prices, according to half-year financial results posted by the firms by Tuesday.
The seven largest life insurance companies saw the volume of their policies slip for the fifth consecutive year in the fiscal first half. In total, policies in force fell 2 percent from March to account for 1.032 quadrillion yen.
The seven life insurance companies are Nippon Life Insurance Co., Dai-Ichi Mutual Life Insurance Co., Meiji Life Insurance Co., Yasuda Mutual Life Insurance Co., Sumitomo Life Insurance Co., Mitsui Mutual Life Insurance Co. and Asahi Mutual Life Insurance Co.
Japan’s four smaller life insurers fared better in terms of the volume of their policies. Taiyo Mutual Life Insurance Co. reported a gain of 0.4 percent, while Daido Life Insurance Co. was up 0.6 percent. The two firms are to merge in April. Fukoku Mutual Life Insurance Co. saw a 0.2 percent rise, while upstart Sony Life Assurance Co. reported a 7.2 percent gain.
In a nation where 10 years ago it was not uncommon for people to have multiple life insurance policies, older customers are slashing their monthly premium payments, while companies have failed to attract younger customers.
The timing couldn’t be worse for life insurers.
Unrealized earnings on stocks and bonds shrank at seven life insurance companies in the six months from April, and four others — Sumitomo Life, Mitsui Mutual, Asahi Mutual and Yasuda Mutual — reported unrealized losses.
The losses forced all four companies to set aside more funds to cover appraisal costs.
Industry giant Nippon Life Insurance put up 151.5 billion yen in appraisal costs for falls in share prices of 50 percent or more, an increase of 54.1 percent from last year.
Nippon Life saw the volume of its policies shrink 1.6 percent in six months to 300 trillion yen, while revenues from premiums fell 1.1 yen percent from a year before to 2.6 trillion yen.
Asahi Mutual said its ability to pay out policy obligations fell in the first half of the 2002 business year because it booked large appraisal losses on securities holdings.
Asahi Mutual booked 26.23 billion yen in losses on its securities portfolios. The seven big insurers said they expected business to continue to decline for the rest of the year.
Customers are shying away at the same time insurers are being slowly squeezed by what is known as negative spread — when promised payouts to policy holders exceed returns companies earn on their investments.
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