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Sompo International foresees ‘meaningful’ margin growth amid M&A and rate rises

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Sompo International is looking to pursue growth through disciplined M&A and leveraging market rate rises, according to parent company Sompo Holdings.

In an investor day presentation, Sompo said the unit would use M&A to “accelerate dynamic growth and diversification”. The Bermuda business is also expecting margin expansion amid improved pricing.

Sompo International’s commercial P&C business is targeting an accident-year loss ratio, stripping out natural catastrophes, Covid-19 and agriculture insurance, of 52.4% for the fiscal year ending March 2024, down from 57.2% in the year just ended, its parent said.

The Sompo International commercial P&C expense ratio target for 2023/2024 is 25.8%, down from 26.1% in the year ended March 2021.

The unit expects to increase commercial GWP by 37% by 2023/2024, upping the top line to 1,328.5bn yen ($12.2bn) from a 2020/2021 figure of 968.1bn yen.

Overall, within its overseas business Sompo expects to boost operating profit to 110bn yen in the fiscal year ending March 2024, up from 30bn yen in the fiscal year just ended.

The targets follow the announcement of high-profile management changes at the Bermuda division, with Sompo International executive chairman John Charman set to retire next year.

Former Zurich commercial insurance CEO James Shea will become CEO of Sompo International and replace Charman as CEO of the overseas insurance and reinsurance business in September.

Sompo said that profitable growth remained a key priority for Sompo International and it would retain an “opportunistic” but disciplined underwriting approach.

The Bermuda operation expects pricing to remain strong in 2021 given the low interest rate environment, rising loss-cost trends and Covid-19 losses.

In 2022 and 2023 it expects price growth to moderate but remain “positive and beneficial to profitability”.

Net profit at Sompo International was down 43% to $182mn in the year to 31 March 2021, with an $84mn drop in underwriting earnings attributed mostly to Covid-19.

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