Mitsui Sumitomo Insurance's strategic initiatives to drive performance: AM Best

Potential risks may arise from MSI’s stock investments and bond holdings.

Japanese non-life insurer Mitsui Sumitomo Insurance (MSI) was reported to have a sturdy balance sheet and operating performance, AM Best said.

The insurer has a strong balance sheet with high risk-adjusted capitalisation as indicated by its Best's Capital Adequacy Ratio (BCAR) and maintains low financial leverage and possesses good quality capital. 

However, potential risks associated with equity and interest rates due to MSI's stock investments and bond holdings, particularly considering recent uncertainties in Japan, remain to linger. 

Despite this, the company is expected to have sufficient available capital to mitigate these risks.

MSI has maintained a strong operating performance, supported by consistent growth in premium income and a five-year average return-on-equity of 9% (fiscal years 2017-2021).

The company's domestic insurance business has demonstrated strong underwriting performance over the past five fiscal years, with an average combined ratio of 94.1%. 

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However, the overseas business has been adversely affected by the poor performance of MS Amlin companies in the fiscal year 2022 but has shown some improvements compared to the previous year.

The non-life insurer holds a substantial share of around 20% in Japan's tightly consolidated non-life insurance market, measured by net premium written. 

Additionally, MSI maintains a significant overseas insurance business, which contributes roughly 30% of its consolidated net premium income. 

The company aims to expand its size and enhance the profitability of its overseas operations to diversify its profit sources.

AM Best said the company's ongoing strategic initiatives are expected to contribute to the maintenance of its strong operating performance and favourable business profile in the medium term.