Sompo Holdings sees better fire and casualty margins improving outlook

Morningstar now expects Sompo’s net profit to reach about ¥520b in fiscal 2026.

Sompo Holdings expects stronger profitability in the year ahead as lower catastrophe losses and better margins in its fire and casualty business improve its earnings outlook.

Morningstar said the insurer’s September-quarter results already exceeded expectations, with net profit reaching $2.3b (¥360b) and adjusted profit at $1.6b (¥247b), prompting Sompo to raise its full-year targets to $3.5b (¥540b) and $2.8b (¥440b), respectively.

Morningstar now expects Sompo’s net profit to reach about $3.3b (¥520b) in fiscal 2026 after the analyst lowered the loss ratio assumption by two percentage points to 60% and factored in higher investment income.

The firm noted, however, that some of the recent gains—such as lower catastrophe losses and stronger overseas investment income -- are unlikely to repeat.

The analyst said profitability in fire and casualty insurance should continue to improve and sees a 50-basis-point gain in the loss ratio after fiscal 2026.

The company’s mid-cycle investment return assumption remains unchanged at 2.9%.

Over the medium term, Sompo aims to achieve an adjusted ROE of 13% to 15% by fiscal 2027, the final year of its current plan.

Morningstar’s five-year average forecast remains at 10%, but it noted that the target could be met through acquisitions and increased share buybacks, which the analyst has not included in the base case.

The Aspen acquisition and better fire insurance margins are expected to lift ROE by about 1 percentage point and 0.5 percentage point, respectively.

($1.00 = ¥156.63)