Sompo Holdings, Japan’s third-largest property and casualty insurer, is planning to increase its investments in higher-yielding overseas credit to bolster profits amid struggles in its traditional domestic business. The Tokyo-based company has already moved several investment managers from its Japanese insurance subsidiary to the United States this month, according to Toshinobu Kondo, general manager of Sompo’s investment management department.
Sompo intends to invest broadly in credit assets that offer high profitability and different risk-return characteristics, Kondo stated. Both the Japan and US units may collaborate to lower costs by selecting the same asset managers for deals, including those involving private credit and junk bonds. Asset management is becoming increasingly crucial as a source of profits for the insurer. Sompo’s core business revolves around providing property and casualty insurance, focusing on auto and home coverage. Sompo is a major player in the insurance sector, offering a diverse range of financial security products and services.
Japanese property and casualty insurers like Sompo are encountering challenges in achieving substantial growth within the mature home market. The country’s rapidly ageing population is impacting the demand for mainstay products like auto and home insurance. This situation has prompted companies to pursue expansion in overseas markets, with some initial signs of success. Sompo’s total operating revenue rose 4.7 per cent in the fiscal year ended March 2025, bolstered by an 8.6 per cent increase in overseas revenue, while growth in Japan was limited to 1.9 per cent.
Furthermore, pressure from policymakers to unwind cross-shareholdings may provide a temporary boost to insurers. Selling off these shares has been generating one-off trading profits, although it will eventually eliminate income from dividends. According to Steven Lam, a Bloomberg Intelligence senior industry analyst, further sales of strategic stock holdings and solid underwriting results are the primary drivers of profit for these companies.
