Strong domestic profits offset Japan P&C insurers' overseas FY2020 losses

Better results in auto and personal accident lines were the reasons.

Robust profits from domestic lines have helped major Japanese P&C insurance groups neutralise the pandemic-induced FY2020 losses that were incurred overseas, according to a Moody’s Investors Service report.

MS&AD Insurance Group Holdings, Sompo Holdings and Tokio Marine Holdings all saw their adjusted profit of domestic business increase 33%-639% in FY2020, triggered by better results in auto and personal accident insurance. On the other hand, their adjusted profit of overseas lines dropped by 40 to 114% due to business interruption claims, event cancellations and credit insurance policies, the report said.

Sompo and Tokio Marine reported increases in group-wide adjusted profit of 34% and 17% respectively due to their strong domestic businesses offsetting feeble overseas performance. 

The same could not be said for MS&AD as its adjusted profit dropped 8% due to the hits sustained in overseas business, in particular higher losses from interruptions in its European businesses. 

On the brighter side, all three groups can foresee an ease in pandemic-related overseas losses come FY2021 as terms and conditions to mitigate such losses come into review.

There may be muted growth in the three groups’ capitalisation in FY2021 as current economic solvency ratios are already close to or higher than the upper end of target ranges, the report said. However, a combination of shareholder returns, higher investment in riskier assets and possible mergers and acquisitions can help improve capital efficiency.