Reports from the Nikkei suggest that Japan’s MS&AD Insurance Group could be looking into closing some of its overseas locations in an effort to improve profitability across the group and meet its performance goals.
Speaking in an interview with Nikkei, MS&AD’s President and CEO Noriyuki Hara explained that some areas of the company’s overseas business are not currently on track to meet their minimum ROE target of 6% by 2025.
In fact, the group reported an adjusted net loss of 29.4 billion yen for overseas operations for the April-December period of 2022.
And this was in addition to further insurance losses relating to Russia’s invasion of Ukraine, Hurricane Ian in the US, and further COVID losses in some Asian markets.
MS&AD is currently targeting adjusted annual profit from overseas property insurance of 125 billion yen to 130 billion yen, based on average natural disaster losses, which would represent some 30% of the group’s overall net profit.
And it seems, according to Hara’s interview with Nikkei, that MS&AD would rather drop certain locations entirely than alter these medium-term targets.
“There are roughly five locations where ROE is less than 6%, and we are already considering withdrawal from some,” Hara said. “In that case they would most likely be sold.”
While he did not specify where the underperforming locations were, he did name some broader geographies into which MS&AD wants to expand further, as well as what kind of business is looking most attractive.
“We want to increase our presence in the U.S., Asia and Europe,” Hara told Nikkei, adding that: “We’re looking to expand underwriting outside of natural disasters.”
Part of MS&AD’s commitment to its profitability drive could be related to the rising cost of reinsurance, which may lead to even further volatility at its underperforming locations.
On this topic, Hara predicts that “the flow of investor capital into the reinsurance market will slow, and reinsurance premiums will continue to rise,” which could result in a higher level of acquisitions, he said.
