Company Reports

Following December quarter results from Dai-Ichi Life that were largely within our expectations, we maintain our projections and fair value estimate of JPY 3,000. We think shares are slightly overvalued at the current price level. Among Japan's insurance industry, the nonlife segment has better growth prospects on greater potential for rising insurance product prices, so that Dai-Ichi Life may lag in its performance compared with Japan's large general insurers Tokio Marine and MS&AD.

Dai-Ichi Life Holdings announced a takeover bid for Benefit One whose price tops a takeover bid currently underway by medical information provider M3. Unlike M3’s bid, which is only for a maximum of 55% of Benefit One, Dai-Ichi Life is offering to buy 100%. We think Dai-Ichi Life’s bid therefore provides a more attractive exit for Benefit One’s parent company Pasona, even if M3 raises its offer.

We've revised Japanese insurers’ fair value estimates as higher interest rates and a weak Japanese yen boost investment returns. Tokio Marine's climbs by 16% to JPY 3,300, MS&AD Insurance’s by 6% to JPY 5,000, Sompo’s by 7% to JPY 6,500, and Dai-Ichi Life’s by 11% to JPY 3,000.

Following its demutualization and IPO in 2010, Dai-Ichi Life Holdings has transformed from one of Japan’s big four traditional life insurers to a multinational holding company with a multi-brand, multi-channel strategy. In Japan, Dai-Ichi Life Insurance Co. is still the largest entity, accounting for around two thirds of total assets, premiums, and profits. Its main sales channel is tied agents who are long-term employees of the company and give customized consultations to potential customers at their workplaces or homes, with various products tailored to different age groups and their savings and protection needs. The second-largest domestic entity is Dai-Ichi Frontier Life, established in 2006 when Japan was deregulating bancassurance and having steadily grown since then. It provides in-depth on-site training to bank tellers who mainly sell savings products, particularly foreign-currency-linked annuities. The third and smallest domestic entity is Neo First Life, which focuses on selling via the internet by providing products that are relatively easy to understand and easy for the insurer to process. Neo is small but growing rapidly with a skew toward younger customers.

We are maintaining our fair value estimate of JPY 2,700 for Dai-Ichi Life Holdings after its first-quarter earnings for the fiscal year ending March 2024. This estimate is equivalent to 0.35 times the embedded value and is nearly equal to the current share price.

Following its demutualization and IPO in 2010, Dai-Ichi Life Holdings has transformed from one of Japan’s big four traditional life insurers to a multinational holding company with a multi-brand, multi-channel strategy. In Japan, Dai-Ichi Life Insurance Co. is still the largest entity, accounting for around two thirds of total assets, premiums, and profits. Its main sales channel is more than 40,000 mainly female tied agents who are long-term employees of the company and give customized consultations to potential customers at their workplaces or homes, with various products tailored to different age groups and their savings and protection needs. The second-largest domestic entity is Dai-Ichi Frontier Life, established in 2006 when Japan was deregulating bancassurance and having steadily grown since then. It provides in-depth on-site training to bank tellers who mainly sell savings products, particularly foreign-currency-linked annuities. The third and smallest domestic entity is Neo First Life, which focuses on selling via the internet by providing products that are relatively easy to understand and easy for the insurer to process. Neo is small but growing rapidly with a skew toward younger customers.

We lift our forecasts for Japanese insurance companies. Our fair value estimates rise by 19% for Tokio Marine to JPY 2,850, by 9% for MS&AD Insurance to JPY 4,700, by 9% for Sompo Holdings to JPY 6,100, and by 4% for Dai-Ichi Life to JPY 2,700. The changes mainly reflect increases in our assumptions for investment returns, as higher interest rates, the weaker yen, and favorable Japanese equity markets more than offset increased hedging costs. As a secondary factor, the changes also reflect increases in our assumptions for Tokio Marine’s and Sompo’s overseas underwriting returns. Exposure to U.S. commercial real estate, or CRE, is a concern for both Tokio Marine and Dai-Ichi Life, but our forecasts do not assume CRE-related losses would be large enough to derail the overall earnings growth trajectory.

Following its demutualization and IPO in 2010, Dai-Ichi Life Holdings has transformed from one of Japan’s big four traditional life insurers to a multinational holding company with a multi-brand, multi-channel strategy. In Japan, Dai-Ichi Life Insurance Co. is still the largest entity, accounting for around two thirds of total assets, premiums, and profits. Its main sales channel is more than 40,000 mainly female tied agents who are long-term employees of the company and give customized consultations to potential customers at their workplaces or homes, with various products tailored to different age groups and their savings and protection needs. The second-largest domestic entity is Dai-Ichi Frontier Life, established in 2006 when Japan was deregulating bancassurance and having steadily grown since then. It provides in-depth on-site training to bank tellers who mainly sell savings products, particularly foreign-currency-linked annuities. The third and smallest domestic entity is Neo First Life, which focuses on selling via the internet by providing products that are relatively easy to understand and easy for the insurer to process. Neo is small but growing rapidly with a skew toward younger customers.

We retain our fair value estimates of JPY 2,400 for Tokio Marine Holdings, JPY 4,300 for MS&AD Insurance, JPY 5,600 for Sompo Holdings, and raise our fair value estimate for Dai-Ichi Life Holdings to JPY 2,600 from JPY 2,500. Our estimates represent 0.96 times book value for Tokio Marine adjusted for catastrophe, contingency, and price fluctuation reserves, unrealized gains on bonds not marked to market, and the value of in-force life insurance business; 0.50 times book value for MS&AD with the same adjustments; 0.68 times book value for Sompo with the same adjustments; and 0.37 times embedded value for Dai-Ichi Life, reflecting the divergent midcycle returns on economic book value.

Following its demutualization and IPO in 2010, Dai-Ichi Life Holdings has transformed from one of Japan’s big four traditional life insurers to a multinational holding company with a multi-brand, multi-channel strategy. In Japan, Dai-Ichi Life Insurance Co. is still the largest entity, accounting for around two thirds of total assets, premiums, and profits. Its main sales channel is more than 40,000 mainly female tied agents who are long-term employees of the company and give customized consultations to potential customers at their workplaces or homes, with various products tailored to different age groups and their savings and protection needs. The second-largest domestic entity is Dai-Ichi Frontier Life, established in 2006 when Japan was deregulating bancassurance and having steadily grown since then. It provides in-depth on-site training to bank tellers who mainly sell savings products, particularly foreign-currency-linked annuities. The third and smallest domestic entity is Neo First Life, which focuses on selling via the internet by providing products that are relatively easy to understand and easy for the insurer to process. Neo is small but growing rapidly with a skew toward younger customers.

Following its demutualization and IPO in 2010, Dai-Ichi Life Holdings has transformed from one of Japan’s big four traditional life insurers to a multinational holding company with a multi-brand, multi-channel strategy. In Japan, Dai-Ichi Life Insurance Co. is still the largest entity, accounting for around two thirds of total assets, premiums, and profits. Its main sales channel is more than 40,000 mainly female tied agents who are long-term employees of the company and give customized consultations to potential customers at their workplaces or homes, with various products tailored to different age groups and their savings and protection needs. The second-largest domestic entity is Dai-Ichi Frontier Life, established in 2006 when Japan was deregulating bancassurance and having steadily grown since then. It provides in-depth on-site training to bank tellers who mainly sell savings products, particularly foreign-currency-linked annuities. The third and smallest domestic entity is Neo First Life, which focuses on selling via the internet by providing products that are relatively easy to understand and easy for the insurer to process. Neo is small but growing rapidly with a skew toward younger customers.

We maintain our fair value estimate of JPY 2,500 for Dai-Ichi Life Holdings, equivalent to 0.36 times embedded value and 7% above the current share price, after it announced a deal to buy iPet Holdings, the second-largest insurer in Japan focused on pet insurance, for JPY 39 billion, or 4.7 times iPet’s book value including the after-tax value of catastrophe loss reserves and price fluctuation reserves and excluding goodwill.

We maintain our fair value estimate of JPY 2,500 for Dai-ichi Life Holdings, 12% above the current share price, after its April-June results. Net profit of JPY 81 billion was 28% of guidance of JPY 285 billion for the year ending March 2023. Economic profit—which excludes market value adjustments at subsidiary Frontier Life and other noneconomic factors—was JPY 91 billion, 34% of full-year guidance of JPY 270 billion.

We raise our fair value estimates for Japan’s three property and casualty insurers by 7.5%-7.7% and our fair value estimate for Dai-Ichi Life by 4.2% as we roll our forecast models forward a year and incorporate recently reported results. Our new fair value estimates are JPY 7,000 per share for Tokio Marine, equivalent to 0.89 times book value adjusted for catastrophe, contingency, and price fluctuation reserves, unrealized gains on bonds not marked to market, and the value of in-force life insurance business; JPY 4,300 for MS&AD Insurance, 0.47 times book value with the same adjustments; JPY 5,600 for Sompo, 0.60 times adjusted book value; and JPY 2,500 for Dai-Ichi Life, 0.36 times embedded value.

Following its demutualization and IPO in 2010, Dai-Ichi Life Holdings has transformed from one of Japan’s big four traditional life insurers to a multinational holding company with a multi-brand, multi-channel strategy. In Japan, Dai-Ichi Life Insurance Co. is still the largest entity, accounting for around two thirds of total assets, premiums, and profits. Its main sales channel is more than 40,000 mainly female tied agents who are long-term employees of the company and give customized consultations to potential customers at their workplaces or homes, with various products tailored to different age groups and their savings and protection needs. The second-largest domestic entity is Dai-Ichi Frontier Life, established in 2006 when Japan was deregulating bancassurance and having steadily grown since then. It provides in-depth on-site training to bank tellers who mainly sell savings products, particularly foreign-currency-linked annuities. The third and smallest domestic entity is Neo First Life, which focuses on selling via the internet by providing products that are relatively easy to understand and easy for the insurer to process. Neo is small but growing rapidly with a skew toward younger customers.

Japanese insurance results for October-December last week were mostly in line with expectations, except for Tokio Marine, which surprised to the upside again with its second large upward revision to profit guidance in two quarters.

Following its demutualization and IPO in 2010, Dai-Ichi Life Holdings has transformed from one of Japan’s big four traditional life insurers to a multinational holding company with a multi-brand, multi-channel strategy. In Japan, Dai-Ichi Life Insurance Co. is still the largest entity, accounting for around two thirds of total assets, premiums, and profits. Its main sales channel is more than 40,000 mainly female tied agents who are long-term employees of the company and give customized consultations to potential customers at their workplaces or homes, with various products tailored to different age groups and their savings and protection needs. The second-largest domestic entity is Dai-Ichi Frontier Life, established in 2006 when Japan was deregulating bancassurance and having steadily grown since then. It provides in-depth on-site training to bank tellers who mainly sell savings products, particularly foreign-currency-linked annuities. The third and smallest domestic entity is Neo First Life, which focuses on selling via the Internet by providing products that are relatively easy to understand and easy for the insurer to process. Neo is small but growing rapidly with a skew toward younger customers.

Following Japanese insurers’ interim results for the year ending March 2022, we raise our fair value estimate for Tokio Marine by 7% to JPY 6,000; raise Sompo's and Dai-Ichi Life's by 4% each to JPY 5,200 and JPY 2,400 respectively; and retain MS&AD's at JPY 4,000. Our new fair value estimates value Tokio Marine at 0.79 times, Sompo at 0.56 times and MS&AD at 0.44 times their book values adjusted for catastrophe, contingency, and price fluctuation reserves, unrealized gains on bonds not marked to market, and the value of in-force life insurance business; and Dai-Ichi Life at 0.34 times embedded value. Relative to Bloomberg consensus earnings, our fair value estimates value Tokio Marine at 12.4 times, Sompo at 12.6 times, MS&AD at 9.3 times and Dai-Ichi at 8.4 times. Tokio Marine and Dai-Ichi Life are near our fair value estimates, while MS&AD and Sompo have modest upside.

Following its demutualization and IPO in 2010, Dai-Ichi Life Holdings has transformed from one of Japan’s big four traditional life insurers to a multinational holding company with a multi-brand, multi-channel strategy. In Japan, Dai-Ichi Life Insurance Co. is still the largest entity, accounting for around two thirds of total assets, premiums, and profits. Its main sales channel is more than 40,000 mainly female tied agents who are long-term employees of the company and give customized consultations to potential customers at their workplaces or homes, with various products tailored to different age groups and their savings and protection needs. The second-largest domestic entity is Dai-Ichi Frontier Life, established in 2006 when Japan was deregulating bancassurance and having steadily grown since then. It provides in-depth on-site training to bank tellers who mainly sell savings products, particularly foreign-currency-linked annuities. The third and smallest domestic entity is Neo First Life, which focuses on selling via the Internet by providing products that are relatively easy to understand and easy for the insurer to process. Neo is small but growing rapidly with a skew toward younger customers.

Following its demutualization and IPO in 2010, Dai-Ichi Life Holdings has transformed from one of Japan’s big four traditional life insurers to a multinational holding company with a multi-brand, multi-channel strategy. In Japan, Dai-Ichi Life Insurance Co. is still the largest entity, accounting for around two thirds of total assets, premiums, and profits. Its main sales channel is more than 40,000 mainly female tied agents who are long-term employees of the company and give customized consultations to potential customers at their workplaces or homes, with various products tailored to different age groups and their savings and protection needs. The second-largest domestic entity is Dai-Ichi Frontier Life, established in 2006 when Japan was deregulating bancassurance and having steadily grown since then. It provides in-depth on-site training to bank tellers who mainly sell savings products, particularly foreign-currency-linked annuities. The third and smallest domestic entity is Neo First Life, which focuses on selling via the Internet by providing products that are relatively easy to understand and easy for the insurer to process. Neo is small but growing rapidly with a skew toward younger customers.