Japan Post Insurance FY2025 presentation: Net income surges 42% despite policy decline

Introduction & Market Context

Japan Post Insurance Co Ltd (TSE:7181) reported its financial results for the fiscal year ended March 31, 2025, showing substantial growth in profitability despite ongoing challenges in maintaining its policy base. The company presented its results on May 15, 2025, highlighting significant improvements in new business acquisition and investment returns.

The insurer, a core component of the Japan Post Group, has been navigating a transitional period as it balances the ongoing decline in its legacy postal insurance policies with efforts to generate new business growth and enhance shareholder returns.

Executive Summary

Japan Post Insurance reported a 41.8% year-on-year increase in net income to ¥123.4 billion for FY2025, while adjusted profit rose 49.3% to ¥145.7 billion. The company achieved these results despite a 4.5% decline in policies in force, demonstrating effective management of its business transformation.

As shown in the following summary of financial results:

New policy acquisition showed strong momentum with a 26.5% increase in the number of individual insurance policies to 795,000, while annualized premiums from new policies surged 49.9% to ¥175.0 billion. The value of new business saw exceptional growth, increasing by 225.7% to ¥67.9 billion.

The company’s financial soundness remains robust with a solvency margin ratio of 903.2%, though this represents a decrease from 1,023.2% in the previous year. For the fiscal year ending March 2026, Japan Post Insurance forecasts net income of ¥136.0 billion and adjusted profit of approximately ¥142.0 billion.

Detailed Financial Analysis

The substantial increase in net income was driven by several key factors, including a decrease in the provision for contingency reserves and increased dividends from stocks, which helped offset the negative impact of declining policies in force.

The following chart illustrates the major factors contributing to the year-on-year change in net income:

Core profit attributable to life insurance decreased due to the ongoing decline in policies in force, which had a negative impact of ¥27.6 billion. However, this was more than offset by a ¥96.9 billion decrease in provisions for contingency reserves and a ¥26.6 billion increase in dividends from stocks. The company also faced an increased burden of regular policy reserves (¥15.0 billion) and a decrease in interest and dividends from bonds (¥47.3 billion).

Operating expenses decreased by ¥8.8 billion to ¥431.4 billion, with notable reductions in commissions (¥12.3 billion decrease) particularly in maintenance commissions which fell by ¥11.3 billion. This reflects the company’s ongoing efforts to enhance operational efficiency.

Investment Portfolio Strategy

Japan Post Insurance has been strategically adjusting its asset allocation, increasing its exposure to return-seeking assets while maintaining a solid foundation of fixed-income securities. As of March 2025, total assets stood at ¥59.5 trillion, with return-seeking assets increasing to ¥11.1 trillion or 18.7% of the total portfolio.

The company’s asset allocation strategy is illustrated in the following chart:

Within the return-seeking asset category, domestic stocks accounted for ¥3.5 trillion, foreign bonds for ¥4.1 trillion, and alternative assets for ¥1.8 trillion. This strategic shift toward higher-yielding investments has contributed to the company’s positive spread of ¥142.5 billion for the fiscal year, with an investment return on core profit of 1.91% compared to an average assumed rate of return of 1.61%.

The company’s duration management shows assets at 9.6 years and liabilities at 10.9 years, indicating a relatively well-matched position with a moderate duration gap:

Business Performance Metrics

While Japan Post Insurance continues to face challenges with its in-force policy base, the company has made significant progress in generating new business. The number of new individual insurance policies has shown consistent growth over the past three years, increasing from 314,000 in FY2023 to 628,000 in FY2024 and 795,000 in FY2025.

The following chart shows the trend in policy sales:

Annualized premiums from new policies have shown even stronger growth, increasing by 49.9% year-on-year to ¥175.0 billion. This growth has been particularly pronounced in individual insurance products, while medical care premiums declined slightly from the previous year.

The company’s embedded value (EV), a measure of an insurance company’s value combining adjusted net worth and the present value of future profits, remained relatively stable at ¥3,940.8 billion, a slight decrease of 0.6% from the previous year. However, the value of new business showed remarkable growth:

Forward-Looking Statements

For the fiscal year ending March 31, 2026, Japan Post Insurance forecasts consolidated net income of ¥136.0 billion, representing a 10.2% increase from FY2025. Adjusted profit is expected to be approximately ¥142.0 billion, slightly below the ¥145.7 billion achieved in FY2025.

The following chart outlines the factors contributing to the forecast changes:

The company plans to increase its dividend payout to shareholders, with dividends per share scheduled to rise from ¥104 for FY2025 to ¥124 for FY2026, representing a total payout ratio of approximately 55% based on adjusted profit.

Japan Post Insurance’s shareholder return policy has evolved over time, as illustrated in the following chart:

The company noted potential sensitivities to market fluctuations, including the impact of domestic and foreign stock price declines in early April 2025, which are estimated to have reduced EV by approximately ¥60 billion and ¥50 billion respectively. Additionally, the company highlighted sensitivity to interest rate movements and hedging costs in its forecast assumptions.

Despite these challenges, Japan Post Insurance’s strong performance in new business acquisition and profitability demonstrates the company’s resilience and effective execution of its strategic transformation as it continues to adapt to changing market conditions and customer needs.

Full presentation:

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