MS&AD cost cuts support long-term profitability: Morningstar

Forecasts show premiums increasing from $29.9b in 2024 to $32.4b in 2025.

MS&AD Insurance Group Holdings Inc.’s cost savings from ongoing integration and operational changes are expected to support profitability over the longer term, according to a Morningstar Equity Analyst note.

The Japanese insurer should see moderate growth expected over the next few years as the insurer continues to improve efficiency and expand its business.

According to the analyst note dated, MS&AD’s December-quarter adjusted profit had already reached 99% of its full-year target, indicating that the group is largely on track to meet its annual guidance.

Morningstar expects the insurer’s net earned premiums to continue rising in the coming years.

Forecasts show premiums increasing from $29.9b (JPY4.74t) in 2024 to $32.4b (JPY5.14t) in 2025 and $34.1b (JPY5.42t) in 2026, before reaching about $36.0b (JPY5.72t) in 2027.

Revenue is also projected to grow, from $34.5b (JPY5.48t) in 2024 to $38.9b (JPY6.18t) in 2025 and $40.4b (JPY6.41t) in 2026. By 2027, total revenue is expected to reach approximately $42.5b (JPY6.74t).

Morningstar said the group’s consolidated expense ratio to decline to about 32% by fiscal 2031, compared with 33.8% in fiscal 2025.

This could translate into around $756m (JPY120bn) in expense savings, slightly below the company’s $945m (JPY150bn) target.

The insurer is targeting an IFRS-based adjusted return on equity of about 12.4% by fiscal 2031.

Although this is lower than the previous target under earlier accounting rules, it remains above Morningstar’s forecast of around 9%, suggesting potential upside if performance improves.

MS&AD has expanded beyond Japan through overseas acquisitions, including the purchase of Lloyd’s syndicate Amlin in 2017, which increased its exposure to European and North American markets.

At the same time, the group continues to focus on growth opportunities in emerging Asia.

In Japan, MS&AD competes with major insurers such as Tokio Marine Holdings and Sompo Holdings, whilst also maintaining longstanding partnerships, including ties with Toyota Motor Corporation that help support its auto insurance business.

($1.00 = JPY157.53)