[Non-Life Insurance Stocks] A Serious Comparison of Tokio Marine, MS&AD, and SOMPO
Hello, I'm Anri Higashimatsu.
In this article, I will compare the three major non-life insurance companies: Tokio Marine Holdings, MS&AD Insurance Group Holdings, and SOMPO Holdings.
Don't you have an image of non-life insurance stocks as being 'stable, high-dividend, and a bit dull'?
However, if you look closely at the major non-life insurers recently, they are not dull at all.
The sale of strategic shareholdings, share buybacks, overseas insurance businesses, natural disaster risks, reinsurance costs, and improvements in capital efficiency.
The more you look, the more you realize they are packed with investment themes.
If the banking sector is an industry where you look at 'how interest rate hikes affect margins,' the non-life insurance sector is an industry where you look at 'whether risks are being priced correctly,' 'whether excess capital can be returned to shareholders,' and 'whether they can grow overseas'.
In other words, they are not just insurance companies.
They are massive risk-calculation machines. That might not sound very cute, but it's the truth.
In this article, based on the latest financial results, I will compare Tokio Marine HD, MS&AD, and SOMPO HD from an investment perspective.
To give you a rough conclusion first, here is my take:
For long-term business quality, Tokio Marine HD
For undervaluation and the appeal of selling strategic shareholdings, MS&AD
For short-to-medium-term revaluation potential, SOMPO HD
However, each has its pros and cons.
Tokio Marine is strong. But its stock price also reflects that strength to a certain extent.
MS&AD is cheap. But you need to read its profit visibility and capital policy carefully.
SOMPO seems to have significant room for revaluation. But you should keep an eye on overseas acquisitions and fluctuations from natural disasters.
If you buy thinking 'aren't all non-life insurers the same?', it's quite risky.
Even within the same non-life insurance sector, the characters of the three companies are quite different.
*Note: Life insurance stocks are introduced in the following article, so please check that out as well.
Key points of the non-life insurance industry
The earnings of non-life insurance companies can be broadly divided into two categories.
The first is profit from insurance itself.
In other words, it is how much profit remains after receiving insurance premiums and paying out insurance claims when accidents or disasters occur.
The second is profit from asset management.
Non-life insurance companies manage the insurance premiums they receive and their own capital. Since they hold stocks, bonds, and overseas assets, they are also affected by interest rates, stock prices, and exchange rates.
To look at these two factors, there are several important indicators in the non-life insurance industry.
Especially important is the combined ratio.
To put it simply, this is an indicator that looks at "how many yen were spent on insurance claim payments and expenses for every 100 yen received in premiums."
If it is below 100%, it means the core insurance business is profitable. If it exceeds 100%, the core insurance business is in the red and is being supplemented by investment gains.
Therefore, it is a bit risky to look at non-life insurance stocks solely based on "high dividend yield is good."
If the profitability of insurance underwriting is poor, there will also be concerns about the sustainability of dividends.
This is a point you definitely want to check.
Natural Disaster Risk: This is where non-life insurance stocks fluctuate the most
Natural disaster risk is unavoidable when looking at non-life insurance stocks.
Typhoons, heavy rain, earthquakes, hail, wildfires, and hurricanes.
Non-life insurance companies pay out insurance claims when such disasters occur.
In other words, no matter how strong the business is, single-year profits will fluctuate if a massive disaster occurs.
This is where they differ from bank stocks.
Bank stocks fluctuate due to interest rates and credit costs. Non-life insurance stocks fluctuate due to disasters.
Fire insurance, in particular, is heavily affected by natural disasters.
In recent years, due to the increasing scale of disasters and rising repair costs, non-life insurance companies have been raising insurance premiums to improve profitability.
However, there is a time lag before insurance premium revisions take effect.
Also, reinsurance costs are important.
Non-life insurance companies also use reinsurance themselves to prepare for massive disasters.
Simply put, it is "insurance that insurance companies take out".
When reinsurance premiums rise, the costs for non-life insurance companies increase.
This is subtle, but quite important.
If you are looking at non-life insurance stocks, you should look at the annual natural disaster occurrence amount, reinsurance costs, and the progress of insurance premium revisions as a set.
[8766] Tokio Marine Holdings
I see Tokio Marine Holdings as having the highest business quality among the three companies.
It is not just domestic non-life insurance; its overseas insurance business has a significant presence, and its revenue sources are globally diversified.
Since it does not rely solely on the Japanese non-life insurance market, it is less susceptible to the impact of the declining domestic population. This is a very significant strength.
The adjusted net income for fiscal year 2025 is 1.2048 trillion yen.
Even with a decrease in gains from the sale of policy-held shares, it maintains a high level, so it does not seem like "profits were only temporarily generated because cross-held shares were sold."
Furthermore, for fiscal year 2026, it has set a target of 950 billion yen in IFRS-based adjusted net income, an annual dividend of 245 yen, and 400 billion yen in share buybacks.
Returns are also strong.
The sale of policy-held shares is also progressing.
The sale amount for fiscal year 2025 was 745.6 billion yen, and the market value balance has decreased to 1.9643 trillion yen.
This trend makes a very good impression on investors.
Reducing policy-held shares makes it easier to improve capital efficiency. Furthermore, there is a possibility that funds obtained from sales can be used for share buybacks or growth investments.
However, there is a major point of caution regarding Tokio Marine.
That is already highly valued.
The PER is in the 16x range, and the PBR is in the 2.5x range. Among the three non-life insurance companies, it is clearly valued at a premium.
As a company, it is strong.
However, if you ask whether it is the most attractive stock to buy right now, that is a bit of a dilemma.
Investing is really difficult in this regard.
Someone who is beautiful, has a good personality, and is capable at work is generally popular. Stocks are the same; good companies are priced accordingly. The world is not that easy.
Tokio Marine is the top candidate if you want to hold it for the long term with peace of mind.
However, if you are aiming for a revaluation of the stock price in the short to medium term, SOMPO and MS&AD look more interesting.
Tokio Marine is a stock that is "the favorite, but I want to wait for a dip."
[8725] MS&AD
Next is MS&AD.
MS&AD is the stock with the strongest sense of being undervalued among the three companies this time.
The PER is in the 14x range, and the PBR is in the 1.3x range.
Compared to Tokio Marine, there is a significant difference in valuation.
Moreover, the net income for the fiscal year ending March 2026 is 787.3 billion yen. The adjusted ROE is 17.8%. The dividend is 170 yen, and the share buyback is on the scale of 270 billion yen.
Looking only at the numbers, it is quite strong.
However, MS&AD requires a bit of interpretation.
The reason is that the sale of policy-held shares, the transition to IFRS, and the review of capital policy are all proceeding simultaneously.
The sale of policy-held shares is a major theme for MS&AD.
In fiscal year 2024, they sold 708.5 billion yen worth, and in fiscal year 2025, they also sold 476.3 billion yen worth. They have also announced a policy to reduce policy-held shares to zero by the end of fiscal year 2029.
This is quite a positive factor in the medium to long term.
However, in the short term, there is the issue that 'if gains from the sale of strategic shareholdings decrease, profits will appear to have fallen'.
In other words, even if the company's fundamental earning power has not worsened, there may be phases where the reported profits look sluggish.
This is the complicated part.
Also, the ESR is 214%.
Roughly speaking, ESR is a gauge of an insurance company's financial strength. The higher it is, the more leeway they have.
214% is not a dangerous level.
However, compared to Tokio Marine at 268% and SOMPO at 270%, it looks a bit tight.
Therefore, as for whether one can easily say 'it's undervalued, so go ahead and buy back shares!', I would like to be a bit cautious.
That said, I do not have a negative view of MS&AD.
Rather, I think there is room for re-evaluation once the reduction of strategic shareholdings progresses and the way profits are presented becomes clearer.
There is a lot of noise in the short term. But if you look at it in the medium term, it is quite interesting. That is the kind of stock it is.
[8630] SOMPO Holdings
Finally, SOMPO HD.
This time, the one I am most interested in regarding short-to-medium-term investment appeal is SOMPO.
The reason is simple.
It is because the numbers are good, but the stock valuation is still on the low side.
The adjusted consolidated profit for fiscal year 2025 is 535.2 billion yen.
Consolidated net income is 640 billion yen.
Adjusted ROE is 13.4%.
ESR is 270%.
Looking at this alone, it is quite solid.
Yet, the PBR is still near the level of falling below 1x.
This is something I'm a bit curious about.
Of course, SOMPO still has the lingering impression of past governance issues and concerns regarding its domestic non-life insurance business.
However, profitability in the domestic non-life insurance sector is currently improving.
Sompo Japan's adjusted profit reached 217.3 billion yen, and the combined ratio improved to 91.0%.
This is quite significant.
A combined ratio of 91% means that the profitability of insurance underwriting has improved considerably.
Furthermore, rate revisions for fire and automobile insurance are also having an effect.
Strategic shareholdings are also decreasing.
The reduction amount for fiscal year 2025 is 292.4 billion yen. The group's consolidated listed strategic shareholdings have fallen to 1.2 trillion yen.
And a medium-term catalyst is the acquisition of Aspen in the US.
SOMPO is aiming to expand its overseas insurance business through the acquisition of Aspen. It expects a contribution to adjusted profit of approximately 45 billion yen in fiscal year 2026.
Of course, there are risks to the acquisition.
Will PMI, or post-merger integration, go well?
Was the acquisition price too high?
How will it be affected by overseas natural disasters and the reinsurance market?
These are things we need to watch.
However, with a PBR near 1x, an ESR of 270%, and an adjusted ROE in the 13% range, I think there is room for re-evaluation.
Among the three companies compared this time, I feel SOMPO has the most 'room for stock price movement'.
The honor student, Tokio Marine.
The undervalued but slightly complex MS&AD.
The improving and re-evaluating SOMPO.
Looking at it this way, it's much easier to organize.
Henri's Conclusion
Looking at these three companies, I felt once again that non-life insurance stocks are no longer just plain, high-dividend stocks.
They are reducing strategic shareholdings, increasing capital efficiency, growing overseas, and improving core business profitability through insurance premium revisions.
Significant changes are taking place.
However, non-life insurance stocks are not straightforward.
Profits fluctuate due to natural disasters.
Gains from the sale of cross-shareholdings will eventually decrease.
Overseas acquisitions carry integration risks.
If the ESR drops, expectations for shareholder returns will also cool slightly.
In other words, it is dangerous to buy based only on the good news.
But if you grasp the key points to watch, I think it is a very interesting sector.
Let me summarize once more at the end.
Tokio Marine is the high-quality king.
MS&AD is in the middle of being undervalued and undergoing capital reform.
SOMPO is a candidate for improvement and re-evaluation.
They are not all the same type of non-life insurance company.
At this moment, my view is that SOMPO offers short-to-medium-term investment appeal, MS&AD offers a sense of undervaluation, and Tokio Marine offers long-term peace of mind.
Non-life insurance stocks are a bit more idiosyncratic than bank stocks.
But if you can decipher those quirks, they are quite interesting.
I quite like writing investment articles about industries that look plain but are actually undergoing internal changes.
They are not flashy theme stocks, but real changes are happening behind the numbers.
Finding such stocks is the fun part of investing.
Let's not rush, look at the numbers, consider the risks, and make decisions based on our own criteria.
Thank you for reading this far😌
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Also, if there are other stocks or industries you would like me to cover, please leave a comment.
This was Anri Higashimatsu.
※This article is merely a summary of my own thoughts and analysis. It does not recommend buying or selling any specific stock, so please make your own investment decisions after careful consideration.
Reference Materials
Tokio Marine Holdings Fiscal Year Ending March 2026 Financial Results Summary and Presentation Materials
MS&AD Insurance Group Holdings Fiscal Year Ending March 2026 Financial Results Summary and Presentation Materials
SOMPO Holdings Fiscal Year Ending March 2026 Financial Results Summary and Presentation Materials
