SOMPO Holdings, 3Q2016: 23.9% rise in net income

23 February 2017 — Daniela GHETU
SOMPO Holdings Inc., the Japanese insurance group which operates in several European countries, mostly under the SOMPO Canopius brand, saw a 23.9% rise in net income to JPY 110 billion (USD 968 million) on a consolidated basis in the third quarter of the 2016 fiscal year ended Dec. 31, 2016, according to a statement. SOMPO businesses are currently present in the insurance markets of U.K., Guernsey, Ireland, Germany, Belgium, France, Netherlands, Italy, Spain, Switzerland, and Russia.

Improved underwriting profit supported by a lower loss ratio and progress on the sale of strategic-holding stocks timed with an upturn in stock market contributed to earnings growth for domestic nonlife business, said SOMPO Holdings. The group's ordinary profit rose 36.1% to JPY 166 billion for the first nine months of the fiscal year 2016.

Investment income increased 7% to JPY 150 billion, with a 38.7% jump from gains on sales of securities to JPY 43.6 billion, according to SOMPO Holdings. However, the group's underwriting income dropped 1.4 % to JPY 2.3 trillion in the third quarter.

The loss ratio for the group's domestic nonlife unit, SOMPO Japan Nipponkoa Insurance Inc., fell to 59.1% in the third quarter from 62.8% a year ago, due to improvement mainly in fire and allied lines. The combined ratio also improved to 92.9% from 93.5%. SOMPO Holdings said net paid claims decreased in all business lines due to a lower occurrence of domestic natural disasters, with a drop of JPY 28.6 billion to JPY 34.2 billion in third quarter.

Domestic nonlife net written premiums dropped 4% to JPY 1.6 trillion due to "the impact of product revision of fire insurance in the previous year," said SOMPO Holdings. However, net written premiums for voluntary automobile and other lines increased 0.8% and 1.4% to JPY 805.7 billion and JPY 217 billion, respectively.

Overseas insurance outperformed the target plan "mainly due to appropriate underwriting and limited occurrence of natural disasters," said SOMPO Holdings. Net income rose to JPY 13.8 billion in the third quarter from JPY 12.8 billion a year ago, while net written premium income increased by JPY 16.3 billion to JPY 239.5 billion in the third quarter. SOMPO Holdings added "both top-line and bottom-line progressed faster than planned."

For the full fiscal year of 2016, SOMPO Holdings said there will be an unchanged forecast, with net income of JPY 140 billion and ordinary profit of JPY 206 billion. Both the estimated net income and ordinary profit dropped 12.3% and 5%, respectively, from the previous year.

Recently, shareholders of Endurance Specialty Holdings Ltd. approved the proposed merger of Endurance with and into Volcano International Ltd., an indirect, wholly owned subsidiary of SOMPO Holdings. Last October, SOMPO Holdings agreed to acquire Endurance in a $6.3 billion deal intended to expand SOMPO's global reach (Best's News Service, Jan.27, 2017).

SOMPO Japan Nipponkoa Insurance Inc. currently has a Best's Financial Strength Rating of A+ (Superior).

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