Company history

In April 2010 Sompo Japan Insurance, the industry’s number two, and Nipponkoa Insurance, its number four, moved their shares into a new holding company, NKSJ Holdings, listed the same day in Tokyo and Osaka. The same month Mitsui Sumitomo and Aioi Nissay Dowa combined into MS&AD, leaving Japanese non-life insurance to three megagroups behind Tokio Marine. Motor insurance, the core of the domestic market, had stopped growing; scale was the remaining lever, since a larger book buys reinsurance and runs systems more cheaply per unit. Masatoshi Sato, from the Sompo Japan side, took the first presidency.

What NKSJ did not do was merge the insurers. Two operating companies stayed side by side beneath the holding company, each keeping its own policy systems, claims offices, product range and agency force. The life subsidiaries were combined in October 2011 as NKSJ Himawari Life, but the non-life companies — where group profit actually came from — did not become Sompo Japan Nipponkoa until September 2014, four years and four months after the holding company was created. That delay was the price of a merger of equals: decisions on products, systems and personnel all had to be seen to be even-handed, and so they waited.

The cost arrived at once. Against ordinary income of ¥2.62 trillion in the first year the group posted a net loss of $161.7M (¥13bn), and the year to March 2012 — Thai flooding on top of the Great East Japan Earthquake — brought a loss of $1.2B (¥92bn). MS&AD, born the same month, also lost money in its first year; Sompo lost money twice, with duplicated head-office functions and two separate back offices still running underneath. Kengo Sakurada became president in 2012 and would lead the group for a decade.

The 2014 merger produced one insurer and, with it, a name problem. The holding company was renamed Sompo Japan Nipponkoa Holdings — twelve characters in Japanese, cumbersome in English — and only two years later, in October 2016, changed again to Sompo Holdings. Three brands in six years: NKSJ, Sompo Japan Nipponkoa, SOMPO. The short name that a merger of equals could not bring itself to use was precisely the name an overseas build-out needed, and from 2016 the group standardized on “Sompo” across its subsidiaries in Brazil, Turkey and Singapore.

With the domestic motor market shrinking, Sakurada went looking for profit outside insurance. In December 2015 Sompo bought Watami’s nursing-care business, and in March 2016, three months later, the care operator Message Co. The two purchases made Sompo one of Japan’s larger operators of paid nursing homes within half a year, and in April 2016 nursing care and healthcare became a reported segment — something no other Japanese non-life group had done. It began in deficit: revenue of ¥119.1 billion against an operating loss of ¥6.8 billion in FY2016. Four care companies were folded into a single Sompo Care in July 2018, and the business only settled into profit from FY2019 — four years after the first deal.

The larger bet was abroad. Announced on 5 October 2016 and completed in March 2017, Sompo bought the Bermuda-based reinsurer and specialty insurer Endurance Specialty Holdings for $6.3 billion ($5.8B (¥630bn)), the second-largest overseas acquisition by a Japanese non-life insurer after Tokio Marine’s HCC deal. Sompo had entered Lloyd’s with Canopius in 2014 for roughly ¥100 billion, but it trailed Tokio Marine in the United States and MS&AD, which had taken Amlin in 2015. Endurance was placed under a new Bermudian holding company, Sompo International, which became the top of the overseas structure; the acquired company itself was wound up and its reinsurance and commercial units gathered under the SI brand. Overseas insurance went from 12% of group profit to 27%, and overseas revenue doubled from ¥294.4 billion in FY2014 to ¥641.3 billion in FY2017. Sakurada framed it as diversifying away from dependence on Japan, and tied John Charman and Endurance’s senior executives to five-year retention contracts.

By FY2019 group adjusted consolidated profit had climbed from about ¥140 billion to ¥225 billion, carried by three legs — domestic non-life, overseas insurance and nursing care — and the company had begun describing itself not as an insurer but as a “theme park for the security, health and wellbeing of customers.” Governance was modernized in 2018 with a shift to a nominating-committee board and a written group CEO structure. What none of it touched was Sompo Japan itself: its agency network and sales culture were left as they were while the group’s profit was rebuilt around them. The overseas book also brought its own fragility, swinging to a ¥6.0 billion operating loss in FY2018 when catastrophes hit.

In September 2022 Hurricane Ian came ashore in Florida and cost Sompo $424M (¥56bn). Net profit attributable to owners fell to ¥26.4 billion for the year, an 88% collapse from ¥224.8 billion. The overseas shift had changed how shocks travelled: a catastrophe in the United States now ran straight into the consolidated line, and a single year of bad underwriting could erase most of the group’s profit.

Mikio Okumura, president since 2022, argued that on the portfolio of seven or eight years earlier the same storm would have cost well over ¥100 billion. Since the Endurance integration Sompo had rebuilt its reinsurance programme and rebalanced its lines, holding down North American property, so that a loss comparable in gross terms to the 2017 hurricane season came to roughly a third of the earned-premium ratio it had then. The recovery mechanism was rate: SI’s commercial book achieved a 5.4% rate increase in FY2023, and with an asset duration under four years, rising US yields fed quickly into book yield — helped by the ¥200 billion of additional capital transferred to SI in October 2022. FY2023 net profit reached a record ¥416.0 billion, and overseas insurance earned ¥237.6 billion against domestic non-life’s ¥109.7 billion.

In that same record year, the untouched core produced the scandal. Sompo Japan was found to have tolerated padded repair invoices from the used-car chain BigMotor and kept the relationship going; head-office executives were disciplined. The arithmetic of the group had inverted: overseas underwriting and investment income were covering a hole opened at home.

On 25 January 2024 the Financial Services Agency issued business improvement orders under the Insurance Business Act to both Sompo Japan and Sompo Holdings, and named the practice of cross-shareholdings (政策保有株式) as the soil the fraud had grown in: holding a client’s shares to preserve the relationship had bent the judgement of the sales floor. Okumura created an executive post for internal audit, put the head of internal audit before the board, and reordered the three lines of defence. At a shareholder meeting in October 2024 the outside directors themselves said the control framework “was legally sound in form but was not working effectively in practice.”

The decisive lever, though, was capital rather than culture. Sompo accelerated the run-down of its cross-shareholdings, now targeting zero by FY2030, and routed the proceeds into buybacks: $1.7B (¥260bn) of repurchases within a record $2.5B (¥386bn) of total shareholder returns for FY2024, alongside a one-for-three stock split in April 2024 to widen the retail register. Sakurada’s decade had rebuilt the group’s earnings around everything except the domestic insurer; when the reform of that core finally came, it arrived through the shareholder register — and whether it reaches the sales culture that produced the scandal is still unsettled.