Sompo’s risk-adjusted capitalisation reaches peak levels

Despite exposure to equity risk, Sompo has sufficient capital to absorb loss.

Sompo Japan Insurance held a strong balance sheet, robust operating performance, favourable business profile, and sound enterprise risk management (ERM), according to AM Best. 

Sompo’s balance sheet is supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). 

The company maintains conservative financial leverage, with adjusted debt leverage ratios below 25%, although this is higher than its domestic non-life peers in Japan.

Despite exposure to equity risk from significant domestic stock investments and underwriting risk from its expanding international business, Sompo has sufficient capital to absorb potential losses. 

The company’s plan to accelerate the disposal of strategic equity holdings is expected to lower its exposure to equity risk in the coming years.

Sompo's operating performance remains strong, driven by consistent premium growth and a five-year average return on equity of 8.9% from fiscal year 2019 to 2023. 

Although the company faced higher losses in automobile insurance domestically in the fiscal year 2023 (FY 2023), improved underwriting profits in the fire line and reduced natural catastrophe losses helped offset these. Investment income also saw an increase, boosted by favourable interest rates and gains from selling strategic stock holdings.

Sompo's international business, managed by SIH, also improved its adjusted profits in FY 2023, benefiting from higher investment income and fewer natural catastrophe losses, despite reserve strengthening from prior years.

As part of Sompo Holdings, Inc., one of Japan’s largest non-life insurance groups, Sompo holds a significant share of the country’s non-life insurance market, with around 25% of net premiums written (NPW). 

Its international business continues to grow, representing 40% of its NPW and 69% of adjusted profits in FY 2023.