Message from Officer for the Domestic P&C Insurance Business

Regaining trust as the basis for a new Sompo Japan Insurance

Sompo Japan Insurance severely eroded its trust with customers and other stakeholders through a series of issues that included falsified auto insurance claims, manipulation of corporate insurance premiums, and the improper management of policy information with insurance agents. While I have been dealing with these issues even since before my appointment as CEO, I believe their real cause lies in the failure of our business model to adapt to changes in society and business conditions.

We are focused on executing the companywide SJ-R project to create a new Sompo Japan Insurance, driven by the realization that there is no future unless we make changes now. Based on the steady implementation of the business improvement plan, our fundamental reforms to business models and work methods represent a new challenge to transform the company into an entity that earns the appreciation of all stakeholders, making them satisfied with choosing us.

Entrenching cultural reform, rebuilding our business basis

Reforming our corporate culture is the most critical element that underpins the entire SJ-R project. Over the past year, we have been working to foster a healthy corporate culture under the slogan, ‘Be true to customers, society and ourselves.’

Our corporate culture is gradually changing, demonstrated in the consistent improvement seen across seven sets of scores recorded in our Culture Change Survey, which we first undertook in May 2024 covering all employees. Of the 145 initiatives in the business improvement plan, survey scores as of the end of July 2025 showed 126 of them “continue to be effective.” This is a good sign that our executives and employees alike are striving to reform the organization, without regard for the way things were done in the past.

We have put a lot of effort into building the dialogue between employees and management. As of the end of July 2025, the executives from Head Office, including myself, have held town hall-style meetings covering every branch office attended by over 10,000 employees in total. These opportunities for dialogue yielded constructive ideas on company policies, and have been instrumental in encouraging positive change.

Separately, by the end of May 2025, around 4,700 employees visited the “Room for passing down: Learn from the past”^*1 installation that we set up in the head office in November 2024. New recruits are similarly encouraged to visit to help gain a deeper understanding of the problems Sompo Japan Insurance has faced and the related causes.

In April 2025, we also revamped our HR systems in line with our revised set of values, based on “Our Five Promises” created in FY2024 and our “SOMPO’s Values,” that outline our shared Group positions. This has been an important step in creating a culture where employees can combine respect for diverse opinions, think for themselves and have agency, accelerating our transition to a company where people are happy at work in an environment of respect and mutual support.

In addition, recommendations by the SJ-R Working Group, which mainly comprises 41 front-line employees, have been reflected in the formulation of the Customer Trust Quality Standards and a mission statement for the new Sompo Japan Insurance. Among measures being implemented across the company, we have set up a new policy for the ideal insurance claims service. These are all key steps in bottom-up reform.

However, given the prior lack of any effective mechanism to escalate issues (“Andon”), our organizational reforms still have further to go. We can only achieve true reform by changing our business processes and model. Adopting a better balance between generalists and professional staff remains a longer-term issue. Utilizing the ¥30 billion SOMPO Human Capital Fund, we are currently accelerating development and recruitment of professional staff. The key to achieving SJ-R is to instill a spirit of autonomy across the company so employees can think, act and develop on their own initiative, without having to wait for directions.

1. A facility established for employees to ensure that the facts about the loss of public trust stemming from a series of issues are not forgotten,and to pass on the lessons learned to future generations. It allows employees to view documents and watch videos summarizing the situation at the time, as well as giving an overview of administrative sanctions and customer feedback.

Steady progress in strengthening the earning structure and outlook ahead

Over the past year, we have accelerated efforts to strengthen the earning structure.

For example, our fire insurance business had been generating sustained losses in recent years due to harsh conditions that included higher inflation and the increasing severity and frequency of natural disasters. We have now recorded two successive years of core underwriting profit^*2 after we revised premium rates to make product lines sustainable and adopted a more disciplined approach to underwriting.

As with the fire insurance initiatives, we are also working to balance fairness and profitability in auto insurance, by utilizing AI and other means to help optimize claim payment procedures while enhancing expertise.

We have restricted the expense ratio to the same level as last year through various measures, despite making strategic upfront investments for growth. Our target expense ratio in FY2030 is about 30%.
The action plan involves reducing IT costs, executing an optimized branch strategy, and allocating roles between agencies and insurance companies.

Within Sales, besides improving the efficiency of the Retail Business, which is highly susceptible to demographic trends, we are seeking to increase convenience for customers while also improving the business expense ratio.

In the Commercial Business, rather than just being a supplier of insurance, our transformational aim is to act as a corporate group that offers comprehensive professional risk solutions including insurance, based on a detailed understanding and analysis of customer risks.

We are making steady progress in utilizing generative AI to respond to internal inquiries, and in consolidating our sales operations into seven areas nationwide. We expect to reduce the business expense ratio by around 0.5pt by the end of FY2026 through business process optimization.

In April 2025, we set up a new Special Investigation Unit in the claims service division to handle fraudulent insurance claims so we can ensure fair and proper claim payments. We expect to see the loss ratio for auto insurance improve from FY2025.

Elsewhere, the SJ-R Dashboard that we released in July 2024 has deepened awareness of the need for change by helping to facilitate management-employee dialogue based on factual data. I believe this recognition of the need for reform is now embedded in the entire company.

At the same time, we are progressively managing revenue by segment across the entire policy portfolio, which will enable us to implement more precise underwriting practices.

*2Core underwriting profit is underwriting profit less the impact related to catastrophic loss reserve, contingency reserve, and natural disaster policy reserves

Completing SJ-R and evolving as SOMPO P&C

From FY2025, the Sompo Group has adopted a new management structure based on the two business segments of SOMPO P&C and SOMPO Wellbeing. SOMPO P&C brings together the Domestic P&C and Overseas insurance businesses to target optimized returns by expanding our capacity to assume risk through a single combined balance sheet. We will also work to raise the probability and speed of realizing the SJ-R project by enabling the Japanese-style adoption of global best practice.

This will accelerate SOMPO P&C’s transition to a truly global insurer with the capacity to offer optimized risk solutions for customers from a global perspective, integrating the wealth of experience and specialist expertise in our overseas businesses.

There are already many examples of how we are making the most of the knowledge within SOMPO P&C to achieve the SJ-R goals.

For example, incorporating overseas expertise in the design of insurance policies to handle variables such as inflation and FX rates, or the use of AI to evaluate potential claim fraud, is driving change across our product, insurance services and sales divisions. By leveraging our combined balance sheet to pursue enhanced efficiency in areas such as reinsurance and asset management, we also create a capacity unavailable to stand-alone firms, while contributing to higher Group profitability and stability. At the same time, we have begun HR initiatives to develop a diverse, talented workforce through international exchange programs.

On the other hand, change is painful at times and sometimes involves tough choices. My determination to ensure change happens successfully, and is unwavering and strong.

None of these challenges are straightforward, but we will see the SJ-R project to completion and create a new Sompo Japan Insurance that will make all of our employees proud, and ensure our customers and other stakeholders always feel satisfied in choosing SOMPO.

We look forward to these challenges, and we hope you will continue to anticipate the efforts of Sompo Japan Insurance and the Sompo Group.