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Japanese insurers eye more overseas acquisitions

Japanese life insurers will continue looking to Australia and other developed markets for investment targets to bolster earnings growth, Fitch says in its outlook for next year.

They see the strategy as key to offsetting the long-tern impact of a shrinking workforce and greying population at home.

Nippon Life, one of nine insurers covered in the outlook, most recently employed the acquisition tactic, paying $2.4 billion in cash for an 80% stake in NAB subsidiary MLC.

“These developed markets will provide both sizeable premiums and earnings just after the acquisitions,” Fitch says. “Their markets are mature, similar to Japan, but their growing population will provide moderate growth for Japanese life insurers.”

Fitch has upgraded its ratings outlook for Japanese life insurers from negative to stable, and maintained the sector outlook at stable.

Japanese life insurers continue to enjoy solid capitalisation and healthy profitability.

The nine insurers covered by Fitch are Nippon Life, Dai-ichi Life, Meiji Yasuda Life, Sumitomo Life, Mitsui Life, Daido Life, Taiyo Life, Asahi Life and Fukoku Life.

Their combined core profit in the half-year to September 30 grew to ¥1.19 trillion ($13.68 billion) from ¥1.12 trillion ($12.87 billion) in the corresponding period last year.

“Fitch expects strong earnings to be maintained [next year],” the ratings agency says. “The investment spread is likely to improve further because of accumulated foreign bond investments, unless the yen appreciates substantially.”

Fitch has affirmed Nippon Life’s insurer financial strength and long-term issuer default ratings at A with a stable outlook.

“Nippon Life’s ratings are supported by a market-leading position in Japan’s individual life industry…  high-quality capital, low leverage and stable operating performance,” Fitch says.

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