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Nippon Life Insurance Company SWOT & PESTLE Analysis

ID : 52213453 | Nov 2017

OVERVIEW

Name of the Company: Nippon Life Insurance Company

Business Sector: Insurance

Operating Geography: Asia, Japan, Global

About the Company: Nippon Life Insurance also known as Nissay or Nihon Seimei was established in 1889 and is headquartered in Osaka, Japan. It serves the domestic market of Japan and is also expanding overseas to secure growth. It is also into the asset management business which has a strong affinity with the life insurance business where Nippon is making efforts to increase their investment income. It has over 70,000 employees as of 2016.

Revenue: JPY 4,647 billion– FY ended March 31st, 2017.

SWOT & PESTLE Analysis

The SWOT analysis for Nippon Life Insurance Company is presented below:
Strengths
Weaknesses
1. Optimum utilization of Value Chain
2. Capable management team and leadership
3. Strong innovation capabilities and deep consumer understanding
1. Investment in risk management framework
2. Investment in training of sales representatives
3. Improvement of disclosure mechanism and control systems
Opportunities
Threats
1. Diversification of customer needs
2. Mergers & Acquisition deals
3. Benefit of low cost of capital
1. Saturation of Japanese market
2. The Impact of harsh economic conditions
3. Shareholder value dilution
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Strengths

1. Optimum utilization of value chain: At the end of the financial year 2016, in domestic Insurance, Nippon Life Insurance Company had a set of 10 company subsidiaries and affiliates which apart from the insurance business also handle the insurance-related operations such as corporate pension system management work, life insurance verification service etc. For overseas insurance-related operations there are also 6 companies such as the Reliance Nippon Life Insurance Company Limited. Hence the company is catering to all the needs possible from insurance and insurance related work. This is disintegrating the entire value chain of the company to gain greater value by functioning independently.

2. Capable management team and leadership: Nippon Life formulated a 3-year management plan and the current plan which commenced in the year 2015 has been termed as “Zen Shin”. The dimensions of the Zen Shin Plan include reinforcing the group operations, strengthen the domestic life Insurance Business, improving financial stability, solidifying the customer base and also improving human resources. Thus the strategies are well in place to meet the goals keeping in mind the capabilities of Nippon. Thus the company is able to execute its strategy well as seen in a capable management team and leadership.

3. Strong Innovation capabilities and deep consumer understanding- Products such as the Gran Age, the industry’s first product designed for Individuals who live very long lives, the “Five Stars” Plan with Dread Disease Insurance Coverage with Continuous Support, the long Dream GOLD, a single-premium whole-life insurance policy and Wrap Dream, the variable annuity product are a few of the innovations which have come about after understanding the needs of the consumer well.

Weaknesses

1. Investment in risk management framework-The negative interest rates have caused Nippon Life to invest in growth regions and new business sectors, this could imply a risk profile with novel characteristics. Nippon Life needs to invest heavily in order to construct an appropriate risk management framework which can mitigate any loss.

2. Investment in Training of Sales representatives-In the aspect of products and services, the sales representatives which the company invests in can undergo a transformation with increasing dependence on Information communication technology which can cause a change in the digitization of the business model. The company will need to invest in the consultation skills of the sales representatives to act as a competitive advantage for the company.

3. Improvement of disclosure mechanism and control systems: The disclosure mechanism of the company needs to be further improved so that the customers can gain a better understanding of the business information of the company and can make informed decisions. The various control systems within the company are also there in place but due to the total number of systems, the efficiency is comprised, hence the systems need to be streamlined to increase the decision-making process.

Opportunities

1. Diversification of customer needs- Rising demand for insurance products, as the senior citizens in Japan need medical and nursing facilities, there are more women entering the workforce and the assistance with the inheritance issues are diversification of customer needs which can be exploited by Nippon for further growth opportunities.

2. Mergers & Acquisition Deals- Many Mergers and Acquisition deals have struck by Nippon Life Insurance Company to expand the overseas Insurance business. Deals such as Nippon Life increasing its stake in Reliance Life Insurance Co. Ltd or an agreement to acquire a capital stake in the National Australia Bank Ltd in October 2015. This has widely increased the earnings and broadened the customer base for the company.

3. Benefit of low cost of capital: The slow growth rate in the economic activities and the population growth rate is forcing the Japanese companies including the insurance companies to look outside for other growth and fortunately, the low cost of capital is allowing Nippon to expand rapidly.

Threats

1. Saturation of Japanese market: The growth rate for the company in the number of policies sold domestically is growing in single digits. This shows that the market is attaining saturation and needs which will force the company to look for outside opportunities expediently. For the fiscal year 2016. The number stood at 4.68 million the consolidated number for Nippon life and Mitsui life. Growth was fueled by Nissay Mirai no Katachi Plan with Dread Disease Insurance Coverage with Continuous Support, this was introduced in April 2015.

2. The impact of harsh domestic economic conditions: The harsh economic conditions harmed the company domestically. The negative interest rate policy adopted by the Bank of Japan has impacted Nippon life’s management. The slowing growth rates in the developing economies also caused instability in the stock market and the foreign exchange market.

3. Shareholder value dilution: The practice of valuing longstanding relationships than creating shareholder value can be a hindrance for Nippon as it might look to consolidate further in the Japanese market. Nippon Life Insurance Co. consolidated by acquiring Mitsui life in 2015. In the transaction the foreign buyers were rebuffed, as a result the company was sold less than the embedded value.

Nippon Life Insurance Company SWOT analysis has been conducted by senior analysts from Barakaat Consulting.
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