Sompo Japan Insurance has demonstrated strong financial resilience, characterized by a solid balance sheet, robust operational performance, and effective enterprise risk management (ERM), according to a recent assessment by AM Best.
The company has achieved its highest level of risk-adjusted capitalization, as indicated by Best’s Capital Adequacy Ratio (BCAR). Sompo maintains conservative financial leverage, with adjusted debt leverage ratios remaining below 25%, though this figure is higher compared to its domestic non-life insurance peers in Japan.
Despite facing equity risk due to significant domestic stock investments and underwriting risk from its expanding international operations, Sompo is well-positioned with sufficient capital to absorb potential losses. The company has outlined plans to expedite the disposal of strategic equity holdings, which is anticipated to reduce its equity risk exposure in the coming years.
Sompo’s operational performance remains robust, propelled by consistent premium growth and a five-year average return on equity of 8.9% from fiscal years 2019 to 2023. While the company encountered increased losses in domestic automobile insurance in fiscal year 2023 (FY 2023), improved underwriting profits in the fire insurance sector and reduced natural catastrophe losses helped to mitigate these challenges. Additionally, investment income has increased, buoyed by favorable interest rates and profits from the sale of strategic stock holdings.
Sompo’s international business segment, managed by Sompo International Holdings (SIH), also reported improved adjusted profits in FY 2023, benefiting from higher investment income and a decrease in natural catastrophe losses, despite the necessity for reserve strengthening from prior years.
As a key player within Sompo Holdings, Inc.—one of Japan’s largest non-life insurance groups—Sompo commands a significant portion of the country’s non-life insurance market, accounting for approximately 25% of net premiums written (NPW). Its international operations continue to thrive, representing 40% of its NPW and contributing 69% of adjusted profits in FY 2023.
Related topics:
