Sompo continues to lean on foreign ops for group profit boost in 2023

The international insurance and reinsurance operations of Japanese insurance group  Sompo can nearly double their net income in the group's coming fiscal year to ¥151.4 billion on a mix of improved underwriting and higher investment income, Sompo has declared.

Sompo International, handling business outside of the home market, enjoyed a 13.5% or ¥73.1 billion increase in net income to ¥73.1 billion in the fiscal year ended March 31, 2023.

Gross written premium for Sompo International’s commercial lines grew nearly 10% year on year, including 25% growth from the US crop insurer AgriSompo, 7.6% growth from reinsurance and 4.2% growth in non-crop commercial. Reinsurance cession must have fallen notably for AgriSompo, where net written premiums are up by a heady 83% year on year.

Commercial P&C ended up delivering a 0.4 percentage point (pps) decline in its combined ratio to 93.5% as a 2.4 pps reduction in the expense ratio offset troubles with losses, most visible at AgriSompo, where the loss ratio rose 8.5 pps to 93.3%. Reinsurance delivered the only margin improvement among sub-segments.

Commercial insurance ultimately added ¥21.5 billion to its contribution to overall net earnings at Sompo International but was offset by non-operating elements, including outright losses on sale of securities, management said. The contribution from Sompo's international retail side were largely flat year on year.

Further improvements in underwriting margins in commercial P&C will account for nearly ¥35 billion of the planned ¥78 billion in increased profits. Underwriting gains in retail will add nearly ¥16 billion. Investment income should swing to a gain.

Sompo is pencilling in the Sompo International combined ratio for the coming fiscal year at 91.6%, down nearly 2 percentage points from the prior 12M period on big hopes for a lower loss ratio. Management is counting on improvement in crop insurance loss ratios and “controlled catastrophe risk-taking.”

That should make the Sompo International division, once again, the leader in profit growth amongst Sompo units as the group attempts to go from a 152.2 billion group profit in the fiscal year just completed to 280 billion over the ensuing 12M.

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