Sumitomo Life lags in attractiveness amongst peers

The insurer expects a 15% YoY increase in consolidated insurance premiums.

Sumitomo Life was deemed the least attractive stock amongst Japanese life insurers due to low profitability and lower solvency ratios compared to other dollar bond issuers in this sector, said CreditSights. 

Insurance premiums for the group saw a modest 2.4% year-on-year (YoY) increase to $16.64b (¥2.6t), driven by growth at Medicare Life and Symetra, which offset declines at standalone Sumitomo Life. Additionally, annualised new premiums (ANP) rose by 16.6% to $2.08b (¥324.2b) in FY23. 

Core profit for the group increased by 16.9% YoY to $1.96b (¥305.6b). Sumitomo Life Insurance’s core profit rose by 10.7% to $1.67b (¥261.7b), largely due to reduced payouts for hospitalisation and other COVID-19 benefits. Medicare Life also reported its first core profit since its inception. 

Net income surged in 4Q23, with a significant annual increase of 36.8% YoY to $1.05b (¥164b), mainly due to a one-off gain of $0.68b (¥105.6b) from revaluing prior investments in Singlife. 

Excluding this, pre-tax earnings would have dropped from $1.02b (¥160b) to $0.38b (¥60b), a 62.7% decline. 

The group’s consolidated solvency margin ratio (SMR) decreased by 39.5 percentage points to 639.5%, reflecting higher investment risk from stock appreciation and foreign bond accumulation. 

The economic value-based solvency ratio (ESR) also fell, dropping 36 percentage points to 173%. These solvency ratios are weaker compared to other Japanese life insurers with dollar bond issues. 

Looking ahead, the group expects a 15% YoY increase in consolidated insurance premiums to about $19.46b (¥3.04t), primarily due to the consolidation of Singlife. 

However, core profit is projected to remain flat due to high hedging costs and additional expenses offsetting earnings growth from overseas business.