Sompo slashes profit forecast by half on major nat cat & Covid hits

Japanese insurance group  Sompo slashed its profit forecast for its current fiscal year by half, citing natural catastrophe and Covid losses plus automotive claims frequency on the home market plus hyperinflation accounting for its unit in Turkey.

The group is now likely on track for an attributable net profit of ¥80 billion ($572.3 million), half the initial target of ¥160 billion.

Some three quarters of that decline comes at Sompo Japan, where “claims incurred are expected to exceed the previous forecasts due to natural disasters, the spread of COVID-19, and the recovery of automobile traffic, etc,” management said.

The home-market unit Sompo Japan Insurance is now on track for net profit of ¥84 billion, well below the initial target of ¥145 billion.

That ¥61 million downward revision includes ¥32.4 billion in extra domestic nat cat, ¥11.6 billion in above-budget Covid19, ¥12.2 billion more in large loss, ¥17.8 billion additional loss from auto and ¥13.3 billion elsewhere, partially offset by ¥26.5 billion in increased cat loss reserve release.

The Turkey unit will suffer a loss following a ¥15 billion hit from the application of international accounting standards for hyperinflationary economies.

After six months of Sompo's fiscal year, the group had slid to a consolidated net loss of ¥20 billion, versus ¥131 billion in the prior year period.

That loss included a ¥34.3 billion net loss from Sompo Japan, nearly ¥100 billion below the prior year period. Domestic natural disasters were said to take ¥75 billion from the unit results, including ¥45.7 billion on Typhoon No.14 and ¥25 billion on hail.

International operations suffered a milder 12% decline in net profit on the Turkish inflation accounting.

The Himawari Life unit slipped to a loss on ¥21.8 billion in Covid claims.

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