Japan's Financial Services Agency sent inspectors into Sony Financial Group on Wednesday, taking its investigation of cash scandals at Sony Life Insurance up to the holding company, while Prudential Financial's estimates put the cost of sales suspensions at its Japanese life insurers at roughly $1.3 billion of pre-tax adjusted operating income over two years.

The two cases show the regulator moving past individual sales agents to the boards and parent companies that oversee them. That matters for investors in Japan's listed insurers and for foreign groups that lean on Japan for earnings. Prudential, which calls Japan one of its most important markets, said its Japan businesses produced $1.94 billion of adjusted operating income in the first nine months of 2026, down from $2.16 billion a year earlier.

Sony Financial Group's oversight under review

The FSA's on-site inspection will examine Sony Financial Group's governance and internal controls as parent of Sony Life, Nikkei reported. If it finds legal violations or other shortcomings, the agency will consider administrative action such as a business improvement order, the newspaper said.

The inspection follows a run of problems at the insurer. In April, Sony Life received reports from about 30 customers who suspected they had been defrauded, and it is checking roughly 2.8 million customers for losses, the Sankei Shimbun reported. The company disclosed on Sept. 11 that three sales employees had defrauded customers of a combined 54.9 million yen, according to Kyodo News. One of them, who had been based at a branch in Chiba Prefecture, pitched unlisted shares to 13 customers.

The regulator has stepped up its response in stages. It ordered Sony Life to submit reports in April and inspected the insurer itself in September, Kyodo said. Sony Life plans to publish a progress update on its customer review around mid-December, according to the Sankei.

Prudential's Japan profit falls 25%

Prudential's numbers show what a full sales stop can cost. The Newark, New Jersey-based insurer said on Tuesday that its Japan businesses earned $559 million of adjusted operating income in the third quarter, down 25% from $750 million a year earlier. Sales in Japan fell 36% to $291 million on a constant-dollar basis, mainly because of the suspension at The Prudential Life Insurance Co., known as Prudential of Japan.

Group net income slipped to $1.388 billion, or $3.96 a share, from $1.431 billion, or $4.01. After-tax adjusted operating income fell to $1.321 billion, or $3.77 a share, from $1.444 billion. Chief Executive Andy Sullivan said in the earnings release that the company's broader Japan franchise "continued to demonstrate resilience."

In its quarterly report filed on Wednesday, Prudential said the halt at Prudential of Japan had already reduced pre-tax adjusted operating income by an estimated $375 million in the first nine months. It expects a hit of about $500 million for all of 2026 and $500 million to $550 million in 2027, as remediation costs continue and new sales ramp up gradually once they resume.

A separate partial suspension at Gibraltar Life, another Japanese unit, is expected to reduce income by about $100 million this year and $175 million next year. Together, that puts the estimated hit at roughly $1.3 billion across the two years, a total also cited by the trade publication Insurance Business. Prudential said it does not expect a material impact on capital, its Economic Solvency Ratio or cash flows, but warned that the damage would grow if the suspension runs past January.

What the FSA found at Prudential of Japan

Prudential of Japan first stopped new sales voluntarily on Feb. 9, after an internal investigation found misconduct by some employees, and extended the pause in April through Nov. 5. On Oct. 9, the FSA turned that into a formal order barring the insurer from soliciting or signing new policies from Oct. 13 through Jan. 31, 2027. Gibraltar Life was barred from new sales through its life consultant channel for the same period, though the order does not cover its independent agency channel.

In its order, the FSA said Prudential of Japan sold only through its own "Life Planner" sales employees, who are paid entirely on commission, and that successive management teams kept that model in place to protect sales despite repeated cash scandals. The agency cited Life Planners mishandling customers' money, pitching investments unrelated to insurance and lending or borrowing money privately with clients, among other problems.

The regulator also issued business improvement orders to Prudential of Japan, Gibraltar Life and their holding company, Prudential Holdings of Japan. For the two insurers, the orders require outside experts in insurance and corporate governance to review the plans. On Wednesday, Prudential Holdings of Japan said it had set up an improvement advisory committee of external specialists to help draft them, Nikkei reported.

All three companies must submit their plans by Nov. 30. Each must then report progress every three months, with the first report covering the period through the end of February 2027.