Insurance

FWD Group's Japan Business

Norbert Gehrke

30 Aug 2025 — 3 min read

The FWD Group has published its interim results report for the six months ended June 30, 2025, its first since going public on the Hong Kong Exchange in July 2025, allowing for a look at its Japanese business.

FWD entered the Japanese market in 2017 through the acquisition of AIG Fuji Life, which was rebranded as FWD Life Japan. The business has a well-established market leadership in protection products. Since 2022, FWD Japan has been pivoting away from corporate-owned life insurance (COLI) towards individual protection products.

A key strategy is to diversify the product mix. This was marked by the launch of its first savings product in July 2025, a Japanese Yen-denominated single premium variable annuity, to enter the savings and retirement market. Also, in March 2025, a new medical insurance product targeting young customers was launched, which achieved 1.5 times the monthly average sales of the product it replaced in its first three months.

The primary distribution channel is the Independent Financial Adviser (IFA) channel, supplemented by a direct-to-consumer (D2C) channel through its website.

The company has made significant investments in digital sales and operating systems, including:

An upgraded generative AI-powered chatbot for advisors.
An automated claims workflow system, which has been operational since January 2025 and improved straight-through processing.
Policy maintenance and claims services offered via the FWD Omne customer app.

Financial Performance & Key Metrics

Japan is one of the company's four key geographic reporting segments. It contributes around 5% of the group's new business sales.

Annualised Premium Equivalent (APE): Increased by 2% to US$63 million.
New Business Contractual Service Margin (NB CSM): Increased by 7% to US$106 million.
Value of New Business (VNB): Decreased by 12% to US$44 million.
New Business Margin: Decreased from 80.8% to 69.7% (-11.4 percentage points).
- Context: The report notes that excluding the impact of operating assumption changes from year-end 2024, the VNB margin was relatively in line with the prior period
Operating Profit After Tax (OPAT): Declined by 13% to US$93 million.
- Reason: The decline was attributed primarily to one-off claims-related factors and a higher statutory tax rate.

Regulatory, Risk & Capital

Regulatory Changes

Solvency Rules: Japan's Financial Services Agency (JFSA) is changing the regulatory solvency rules from the Solvency Margin Ratio (SMR) basis to an Economic value-based Solvency Regulation (ESR) basis, effective from the fiscal year ending 31 March 2026.
Impact on Solvency Ratio: FWD expects its Japan business solvency ratio to reduce from 1,604% (under SMR) to a range of 150% to 200% (under ESR). The company notes this is not expected to constrain its financial flexibility.
Corporate Tax Rate: Japan has enacted an increase in the corporate income tax rate from 28% to 28.93%, effective from 1 April 2026. This higher statutory tax rate contributed to the decline in Japan's OPAT.

Foreign Exchange Impact & Sensitivities

The appreciation of the Japanese Yen against the US dollar contributed positively to the Group's foreign exchange translation increase in CSM and overall comprehensive income.
CSM Sensitivity: A 5% strengthening of the Japanese Yen would increase the Group's CSM by US$84 million.
Profit Before Tax Sensitivity: A 5% strengthening of the Japanese Yen would increase the Group's profit before tax by US$1 million.

Embedded Value (EV) Supplementary Information

Required Capital

FWD Life Japan: Required capital is set at 600% of the regulatory risk-based capital requirement.
FWD Reinsurance (part of FWD Japan): Required capital is 200% of the regulatory risk-based capital requirement.