EVs of life insures declined by 6-19%

　　On the three trading days after the UK referendum, super long yields declined, the yen appreciated, and the cost of US dollar funding (hedging) rose. We summarize the impact on life insurance, non-life insurance, securities and leasing companies. We estimate 6-19% impairment of EVs of life insurers, but expect no major near-term impact on the P/L of individual companies.

　　Valuation and risks

　　We base our target prices for life insurers on 1) adjusted P/B (P/EV multiple, adjusted tangible P/B), and reference 2) P/E (non-adjusted, adjusted) and 3) dividend & buyback yields. Downside risks include falling long-term interest rates, lower stock prices, yen appreciation, intensifying price competition, concerns about supply/demand erosion in the insurance sector, and a focus on high P/Es and low shareholder yields compared with overseas insurance companies. Upside risks include rising long-term interest rates, high stock prices, yen depreciation, M&A announcements in the domestic life insurance sector (raising expectations for consolidation), expectations for higher earnings, and a continuing focus on low P/Bs (P/EV multiples).