According to analysts at Moody’s, the pandemic-related losses for overseas business for the three major Japanese P&C insurance groups in 2020 were largely offset by the strong profit from domestic business.
The rating agency expects the groups, MS&AD Insurance Group, Sompo Holdings and Tokio Marine Holdings (TMH), to maintain prudent capital management to keep capitalisation strong.
These groups boosted the adjusted profit metrics of their domestic businesses by 33%-639% in the year ended March 2021, offsetting falls in their overseas businesses whilst also reporting strong economic solvency ratios (ESRs) as of the end of March 2021.
The group-wide profit of SOMPO and TMH increased while that of MS&AD decreased.
SOMPO and TMH reported increases of 34% and 17%, respectively, in their group-wide adjusted profit metrics in 2020 due to strong domestic businesses which more than offset their weaker overseas businesses’ performance.
However, MS&AD’s adjusted profit metric declined 8% because of profit deterioration in its overseas business, which exceeded the improvement in its domestic business.
Moody’s expects the three groups to maintain prudent capital management, although the groups will likely improve capital efficiency through a combination of shareholder returns, higher investment in riskier assets and potential mergers and acquisitions.
They also reported improved and strong ESRs as of the end of the fiscal year, reflecting favourable market movements such as higher stock prices and interest rates as well as internal capital generation.
Soichiro Makimoto, a Moody’s Vice President and Senior Analys commented: “Better results in auto and personal accident insurance as economic activities reduced amid the pandemic, and lower natural catastrophe losses from a record high in fiscal 2019 lifted the three groups’ domestic businesses.
“Meanwhile, profits in their overseas businesses decreased 40%-114% in fiscal 2020 because of pandemic-related claims for business disruption, event cancellation and credit insurance policies.”
