Dai-ichi Life Insurance Company is set to significantly reduce its exposure to equity risk, with plans to cut such exposure by more than 50% by 2030, according to Fitch Ratings. The move is part of the Japanese insurer’s broader strategy to strengthen its financial position.
Fitch also forecasts that the company’s financial leverage will stay below 23%, bolstered by the issuance of a $2 billion perpetual subordinated bond, which is expected to further enhance its capital base.
As of March 2024, Dai-ichi Life’s consolidated economic solvency ratio (ESR) stood at 215%, slightly down from 223% the previous year. Despite the challenges posed by a steepening Japanese yen yield curve, the ESR remains relatively stable, thanks in part to conservative assumptions about surrender and lapse rates.
Profitability at Dai-ichi Life has seen a rebound, with the company’s core profit margin rising to 15% in the first half of the fiscal year ending March 2025, compared to 13% in the same period the previous year.
Although Dai-ichi Life holds some exposure to US commercial real estate through its US life insurance subsidiary, Fitch views the associated risks as manageable in relation to the company’s earnings and capital buffer. Looking ahead, Dai-ichi Life anticipates further growth, particularly through its US-based subsidiary, Protective Life Corporation.
The planned acquisition of US insurer ShelterPoint Group, announced in April 2024, is expected to add $40 million to $50 million in annual net income to Protective Life. Fitch considers this acquisition a positive step in diversifying Dai-ichi Life’s US business portfolio.
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