Life Insurance

Nippon Life booked ¥500 billion in domestic bond losses in the first half of fiscal 2025. The same firm posted a record ¥1.01 trillion in basic profit for the year. Both figures come off the same balance sheet, and the market has yet to decide which to believe. Earlier this year this blog argued that Japan’s listed life insurers look structurally cheap on embedded value. Daiichi Life Group (8750), renamed from Dai-ichi Life Holdings on 1 April 2026, and T&D Holdings (8795) trade at 0.6 to 0.7 times P/EV, while European peers change hands at 0.8 to 1.0. One paragraph of that piece brushed past the growing unrealised losses on domestic bond holdings. Accounting noise, it said. Economic substance elsewhere. ...

Within twenty-four hours, the two central banks that matter most for Japanese equity investors held their policy rates steady. The Bank of Japan kept its overnight call rate at 0.75 per cent. The Federal Reserve kept its federal funds rate at 3.50–3.75 per cent. Both decisions were expected. Neither was the story. The story is in the dissents, and in what they reveal about the diverging trajectories of the world’s two largest bond markets, the unwinding of the yen carry trade and why TOPIX, and Japanese financial stocks in particular, are positioned to outperform global indices through the turbulence ahead. ...

In the alphabet soup of financial metrics, few are as obscure (or as revealing) as Embedded Value (EV). While equity investors worldwide obsess over PER and PBR, a handful of listed Japanese life insurers are quietly trading at 60 to 70 cents on the yen of their intrinsic worth, measured by a yardstick that almost nobody outside the insurance sector bothers to learn. That is about to matter. Japan’s interest-rate regime is shifting. Its population is ageing into a demographic structure that demands more, not less, private insurance. And the regulatory apparatus that suppressed insurer profitability for two decades is now, paradoxically, creating the conditions for outsized returns. Understanding why requires a detour through the peculiar economics of life insurance, and a valuation framework that most retail investors have never encountered. ...