Fitch Says Japan's Big Three Non-Life Insurers Are Well Placed for Strong Underwriting, but Profits Leaned on Selling Strategic Shareholdings

Japan's three largest non-life insurance groups are earning strong underwriting results, but a large part of their headline profit comes from something other than insurance. That is the message of a Fitch Ratings assessment reported by Reinsurance News on June 26, 2026. Although the source is a few months old, it covers the full fiscal year ended March 2026 (which Fitch calls FYE26) and remains the most detailed independent view of the sector's results available at the time of writing; readers should check whether the groups have since published half-year figures.

Fitch says that the three groups, Tokio Marine, Sompo and MS&AD (Mitsui Sumitomo), are "well placed to continue delivering strong underwriting results." It expects underwriting to stay resilient even as investment gains fall. Fitch rates MS&AD A+ with a stable outlook, while Sompo and Tokio Marine are both rated AA- with a stable outlook.

The underwriting improvement is clear in the combined ratio. For the three groups, it improved to 94% in FYE26 from 99% in FYE25. Fitch attributes the better result to stronger underwriting discipline and a better claims environment. A combined ratio of 99% means almost every yen of premium went on claims and costs, while 94% leaves a margin of six yen in every hundred. In domestic motor and property business, Fitch says revised pricing and fewer catastrophe-related claims offset rising vehicle repair costs. Japan is prone to typhoons, floods and earthquakes, so claims from natural catastrophes can swing results sharply; fewer such claims lowered the combined ratio in FYE26.

The profit picture is more complicated. Fitch says that the big three posted combined profits above ¥2 trillion in FYE26, driven mainly by sales of strategic shareholdings. Combined ordinary profit was ¥2.2 trillion, and disposal gains made up 90% of it, compared with 97% the previous year. Strategic shareholdings are the long-standing cross-holdings in client companies that Japanese insurers and banks have held for business relationships. Under pressure from regulators and investors to reduce them, the insurers have been selling the shares, which generates one-off gains. Fitch notes that these gains are excluded from net income under IFRS 17, the international insurance accounting standard, which affects how the profits look to investors.

Fitch expects disposal profits to shrink in FYE27 because the remaining holdings are worth less. This is a key point for the outlook: the sales have given the groups a large one-time boost, but the supply of shares to sell is running down. The insurers will therefore rely more on underwriting and investment income from year to year, which is why Fitch's emphasis on underwriting resilience matters.

Overseas business is a growing pillar. Fitch expects overseas operations to remain a major source of earnings. Growth in US specialty insurance, through both acquisitions and organic expansion, supports underwriting results. Stronger European results boosted MS&AD in particular. The orientation abroad matches the pattern of Japanese life insurers, who are also buying American businesses, as seen in the recent reports about Sumitomo Life and Symetra.

On capital, economic solvency ratios stayed above 200% throughout FYE26. Tokio Marine reported 268% at a 99.5% confidence level, meaning the ratio measures its capital against losses that should be exceeded only once in 200 years. High ratios provide a cushion to absorb losses and fund acquisitions, though the source does not quote ratios for the other two groups.

Accounting is changing. Fitch says the move to IFRS 17 is expected to improve comparability with international peers without materially changing credit profiles. Sompo adopted the standard in FYE26, and MS&AD and Tokio Marine are expected to follow in FYE27. For readers, this means that reported profits for the three groups will not be directly comparable until all have adopted the standard, and that the share-sale gains will no longer appear in net income in the same way.

What should one conclude? First, the underlying business is healthy: a combined ratio of 94% and solvency above 200% indicate substantial strength, and Fitch's ratings are high. Second, headline profit overstates earning power because 90% of ordinary profit came from disposal gains. Third, the cushion will thin as those gains fall, so the groups need to sustain underwriting margins and find new growth, particularly abroad. Fourth, risks remain: rising vehicle repair costs, a bad catastrophe year in Japan, and execution risk on overseas deals could all hurt.

For consumers in Japan, the effects will be mainly in pricing: Fitch says pricing in motor and property has been revised, and further adjustments depend on repair costs and catastrophe experience. For investors and rating watchers, the key indicators to follow are the combined ratio, the share of profit from disposals and the speed of IFRS 17 adoption. The source gives no forecasts for FYE27 profit or combined ratio beyond its general assessment, so no numerical projection is attempted here.