Japanese Insurer MS&AD Plans to Invest as Much as $5 Billion to Double US Profits

MS&AD Insurance Group Holdings Inc. plans to invest as much as about ¥700 billion ($5 billion) to expand in the North American market, to meet its goal of doubling operating profits in the region, according to its chief executive officer.

The Tokyo-based casualty insurer has the highest market share in Asia among global firms, but it’s No. 3 among Japanese peers in North America, “so the challenge is how to become the top player there,” said Shinichiro Funabiki in an interview.

“We need to strengthen our organization so that we can double our profits in the near future,” said Funabiki, adding that the business areas and new investment targets it will pursue will be determined in the future.

Japanese insurers are increasing their presence overseas through takeovers as they face growing challenges in their home market due to a shrinking population. MS&AD announced in March that its subsidiary Mitsui Sumitomo Insurance Co. will take a 15% stake in US insurer W.R. Berkley Corp. The company plans to continue its aggressive investment strategy moving forward, Funabiki said.

MS&AD forecasts that net profit for its North American operations, including Canada and Mexico, will reach ¥166 billion in the fiscal year ended March 2025, a 3.5-fold increase from the previous fiscal year.

MS&AD has already announced its plan to redirect funds from selling cross-held shares of companies with which it had business ties toward growth investments.

Considering the money it’s spending for the stake in US-based W.R. Berkley, the amount available for investment is estimated to be about ¥600 billion to ¥700 billion.

The Japanese insurer also plans to merge its non-life insurance units, Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance Co. with the target date set for April 2027. He declined to comment on cost reductions resulting from the consolidation. The merged company may adopt a personnel management approach based on ability rather than seniority, which Mitsui Sumitomo Insurance began implementing this fiscal year, Funabiki said.

The CEO indicated that merging the companies may help improve the group’s governance. Japan’s Financial Services Agency issued business improvement orders to four non-life insurers including Mitsui Sumitomo Insurance for mishandling customer information in March, and for colluding to fix prices in contracts with corporate clients in December 2023.

“The most lacking aspect was the ability to anticipate risks,” leading to irregularities, Funabiki said. “Having two insurance companies of the same size with a dispersed organizational structure is not an optimal state.”

Photograph: Signage outside the Tokyo Sumitomo Twin Building West Tower, which houses the MS&AD Insurance Group Holdings Inc. headquarters, in Tokyo, Japan, on Friday, Jan. 19, 2024. Photo credit: Kiyoshi Ota/Bloomberg