Japanese non-life overseas operations seen to temper domestic underwriting

The country’s big three non-life players saw their profits surge in FYE24.

The overseas business and investment profit of Japanese non-life insurers is projected to counterbalance weak earnings contribution from domestic underwriting, particularly in motor and property insurance, in the financial year ending March 2025 (FYE25), Fitch Ratings said.

The country’s big three non-life insurers, MS&AD Insurance, Tokio Marine Holdings, and Sompo Holdings, registered high profits in FYE24, attributable to solid support from their overseas subsidiaries coupled with higher underwriting profitability and reduced pandemic-related claims, and the investment profit on the sale of strategic shareholdings. 

The depreciation of the yen also boosted earnings when converted from foreign subsidiaries.

Fitch anticipates challenges in the motor insurance sector, with increased claim frequency due to higher traffic post-COVID-19 and rising repair costs.

The impact of a property insurance premium rate hike in October 2024 will be gradual. Earnings from overseas subsidiaries are expected to counterbalance weak domestic underwriting in FYE25.

Equity risk from strategic shareholdings, a key credit concern, is expected to decline as Tokio Marine and MS&AD plan to sell all their strategic shareholdings by March 2030, and Sompo by March 2031. These sales will continue to support earnings in FYE25.

Strong capital adequacy is anticipated in FYE25. The economic solvency ratio improved in FYE24, supported by accumulated core capital, retained earnings, and capital reserves, ensuring sufficient ratings.