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Japanese groups look to lift overseas earnings: Fitch

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Japanese insurers Tokio Marine, Sompo and MS&AD want their overseas operations to contribute 40-50% of earnings in the medium term, Fitch Ratings says.

“The three non-life groups are continuing to look for merger and acquisition opportunities, particularly in developed markets, to offset sluggish domestic growth prospects,” Fitch analysts say in a report.

Overseas losses from weather-related events including the US hurricanes affected underwriting results for Tokio Marine, Sompo, Mitsui Sumitomo and Aioi Nissay Dowa in the year to March. The combined operating ratio deteriorated to 95% from 92%, but is expected to recover this year to 93%.

Fitch says MS&AD and Sompo suffered losses from newly acquired overseas subsidiaries.

Due diligence, post-merger integration and prudent risk management are important for cross-border M&A, the ratings agency says.

Japanese non-life insurers continued to issue catastrophe bonds last year to provide additional risk mitigation, building on their reinsurance arrangements.