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Saturday, May 31, 2008
Premium revenues drop at six big life insurers
Premium revenues at six of Japan's nine major life insurers dropped in the business year to March, according to earnings results released Friday.
An industrywide failure to properly pay out benefits to policyholders forced them to concentrate their resources on reviewing existing client policies, pushing down their sales and profits from new contracts.
The combined premium revenue of the nine major life insurers fell 1.2 percent to ¥16.8 trillion. The long-term trend of a falling birthrate and a rapidly aging society was also partly blamed for the drop.
Some of the major insurers were also hit by the impact of the U.S. subprime loans crisis, with Mitsui Life Insurance Co. dealt the heaviest blow.
Mitsui reported a net loss of ¥9.6 billion for business 2007, compared with ¥25.8 billion in net profit in the previous year.
Mitsui Life booked ¥22.7 billion in losses from its exposure to subprime-related financial tools as well as other securities products in the year that ended March 31.
"The major reason we went into the red was because of the subprime loan losses and the market confusion that followed," said Yukiteru Yamamoto, a Mitsui board member. "Honestly speaking, we didn't think the value (of subprime-related securities) would fall this much."
Mitsui Life had been planning to go public by the end of March, but the losses forced that schedule to be pushed back to this summer at the earliest. Yamamoto said the net losses probably will not affect the schedule any further because they logged a pretax profit, a key criteria for becoming a listed company.
The impact of the subprime crisis on Japanese life insurers was initially believed to be minimal because they normally invest their clients' premiums on low-risk financial products.
At the end of last September, only two of the nine major life insurers booked such losses — worth a combined ¥1.9 billion.
But Friday's results showed most of them were not immune to the global upheaval. Dai-ichi Mutual Life Insurance Co. booked ¥24.5 billion in subprime loan-related losses and other securities products.
In contrast, Sumitomo Life Insurance Co. booked ¥800 million in profit from housing loans because it sold off the securities products in the first half of the business year, before the crisis surfaced.
"We try not to invest in financial products that are (not transparent) like a black box because it is more difficult to manage," said Susumu Aramaki, general manager of Sumitomo.
Still, Sumitomo's premium revenue plunged 13.1 percent to ¥2.5 trillion, while its core business profit declined 21.4 percent to ¥238.1 billion.
Nippon Life Insurance Co., Japan's biggest life insurer in terms of premium revenue, meanwhile suffered a 43.7 percent fall in sales from new contracts to ¥6.45 trillion. The sharp decline forced Nippon Life to fall to third place in this category, trailing Dai-ichi Mutual and Sumitomo.
Nippon Life's core insurance profit plunged 12.7 percent to ¥637.5 billion as it focused most of its manpower on dealing with the aftermath of payout failures.