Japan: An Attractive Insurance Market for Prudential Financial

Japan is the world’s second largest life insurance market in terms of premiums. Total life insurance premiums in Japan amounted to $423 billion in 2013, after the US market, which received $533 billion in life insurance premiums in 2013. Prudential Financial (PRU), Manulife (MFC), Aflac (AFL), and MetLife (MET) are among the foreign players operating in the Japanese insurance market.

The primary driver in the growth of Japan’s retirement market is an aging population, as well as a growing awareness toward retirement planning by individuals. The above chart shows the proportion of people in the higher age bracket of 55 and over has increased in Japan. This age bracket should exceed the 45% mark by 2030.

This increasing proportion of pre-retirees and retiring employees in Japan’s population creates a growing market for retirement products in that country.

Prudential Financial’s premiums from the sale of new products, and excluding renewal premiums, quadrupled between 2001 and 2013, while the number of policies increased 11 times during this period, helped by acquisitions as well as organic growth.

Since the Japanese market is mature and characterized by competitive pricing, Prudential competes in this market through its customer service and distribution capabilities. Distribution is undertaken by captive agent models, such as Life Planners and Life Consultants, along with sales through banks and independent agents. The captive agent models have been successful and contribute a large proportion of sales, as we’ll see in the next article.

Investors interested in gaining exposure to the insurance sector can invest through ETFs like the iShares US Financials ETF (IYF) or the Financial Select Sector SPDR ETF (XLF).