Sompo will grow premium 7% in next fiscal year as rate gains temper

Japan-based global insurer Sompo grew its business by 10% in its fiscal year ended March 31 and vowed to tack on another 7% over the next 12M as foreign P&C continues to surge even amid rate slowdown.

Net written premium for the group rose 10% or ¥292 billion to ¥3.22 trillion ($21.5 billion), still driven by dramatic growth in Sompo's global markets to counter stagnation on the home market where the bulk of its business still rests.

Overseas P&C operations delivered net written premium growth 28.6% in dollar-terms, all well above the 0.8% (yen) growth on the home market. Those markets will remain the driver in 2022, with 12% NPW growth expected for the year.

The foreign P&C markets benefitted from 16.2% rated growth in fiscal year 2021, but are likely to take only 8% rate increase in the coming year, management noted.

Life insurance continued to contract, down 6.1% year on year in terms of net premium written.

Underwriting profits for the group slipped nearly 5% from the prior year to ¥63 billion, chiefly on an increase in catastrophic loss reserves and despite lower domestic nat cat. Core underwriting profits of ¥120.2 billion were up 17.4% on the prior year.

The high-growth overseas P&C operations growth-driving foreign operations increased their underwriting profits 7 times over in dollar terms, but still remain a fraction of the whole. Sompo expects another 80% growth to $759 million in fiscal year 2022.

The foreign P&C units should trim 2.5 percentage points (pps) from their loss ratio and double the reduction in the expense ratio to 0.8 pps to hit a 90.7% combined ratio by the end of the next fiscal year. The elimination of prior problems in Brazilian operations should deliver an easy win.

Japanese P&C operations should increase underwriting profits by ¥15.9 billion on improved profitability in fire & allied lines, management noted.

The bottom line - where consolidated net income rose profits nearly 60% to ¥224.8 billion, benefitted handsomely from rising investment earnings and the net on exceptional earnings from the sale of stock at the holding. Investment earnings rose 11.5% or ¥17 billion and the net on exceptional profits added ¥60 billion to the year-on-year gain in profit.

The end of those exceptional profits will force a decline on the bottom line in 2022, management warned.

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