Mid-Term Management Plan (FY2024–2026) targets and goals for FY2030
The first year of the current Mid-Term Management Plan (MTMP) that began in FY2024 has now ended. On an IFRS basis, we have set a Group management target of at least 12% for the CAGR for adjusted EPS to increase adjusted consolidated ROE to 13–15% by FY2026, the final year of the plan. Moreover, the goals for FY2030 are a market capitalization of ¥6 trillion and adjusted consolidated profit of ¥500 billion, along with a reduction of strategic shareholdings to zero by this time.
Under the MTMP, we are actively reallocating more capital to help achieve our goals. In FY2024, based on a disciplined capital policy, we announced the Group’s largest ever share buyback of ¥260 billion. From FY2025, we consolidated the Group’s operations into two business units, SOMPO P&C and SOMPO Wellbeing, creating a structure to optimize risk-return both in Japan and overseas. We were also the first Japanese P&C insurance group to make the full-scale transition to International Financial Reporting Standards (IFRS).
My mission as Group CFO is to ensure we succeed in hitting the MTMP and FY2030 goals by progressing these initiatives steadily and effectively while generating sustained growth in stock valuation and adjusted EPS and boosting our return on capital to globally competitive levels.
Below I will review in detail the progress made in the first year of the current MTMP and SOMPO’s financial strategy.
Review of first year of current MTMP and outlook
Based on our success in FY2024 in upgrading the earnings forecast and pursuing a disciplined capital policy, the share price rose 40% to ¥4,521 at the end of March 2025, up from ¥3,190 a year earlier when the current MTMP started. Market capitalization increased significantly to ¥4.2 trillion, driven mainly by the growth of the overseas insurance business and the sale of strategic shareholdings and disciplined measures to enhance shareholder returns. At the same time, over the past year we have steadily implemented key Group strategies such as SJ-R initiatives, regional overseas expansion and investment to strengthen the SOMPO Wellbeing business foundation. Nonetheless, we recognize we have not yet seen substantial growth in profitability. Increasing stock valuation to the ¥6 trillion level by FY2030 will require steady implementation of Group strategies leading to higher profit margins and an enhanced scale of earnings.
With future profit growth front of mind, we made steady progress in FY2024 towards achieving the target CAGR for adjusted EPS of at least 12%, including a capital adjustment of ¥110 billion via share buybacks during the year. While the adjusted consolidated ROE target (13–15% level) is challenging, I believe we should primarily focus on measures to boost the ROE numerator such as improving the basic return from our existing operations while also growing adjusted consolidated profit through disciplined growth investment. However, we must be disciplined in judging growth investments even though they are dependent on opportunities arising. We will concentrate on ROE numerator measures first, while watching various factors such as the status of the growth investment pipeline and income opportunities; market conditions; and the impact of share buybacks. Where necessary, we will also consider capital adjustments or other ROE denominator measures. In either case, the core focus is on realizing growth and achieving the FY2026 target for ROE using a balanced approach.
Figure 1 Adjusted Consolidated Profit
- Old standards (Japanese GAAP) basis until FY2023, IFRS basis from FY2024
- Normalized earnings since FY2021: Adjust the one-time factors such as impact of COVID-19, major losses, natural disasters (only domestic
natural disasters since FY2023), etc., to original plan
- Old standards (Japanese GAAP) basis actual FY2021: ¥261.3 billion., FY2022: ¥152.2 billion., FY2023: ¥291.0 billion., FY2024: ¥334.3 billion.
- IFRS actual FY2024: ¥323.4 billion.
Figure 2 Adjusted EPS
- Normalized earnings, estimates for FY2021 and FY2022
Figure 3 P/B Ratio and Adjusted Consolidated ROE
- Normalized earnings, estimates for FY2021 and FY2022
- Estimates for FY2021 and FY2022
Capital generation and reallocation
The evolved financial strategy in the current MTMP involves, in the first instance, the internal management of allocated capital by each Group business to maximize risk-return and achieve KPIs, including the ROE targets set for each business. This contributes to the Group achieving its consolidated performance targets. The holding company collects and reinvests the profits generated by each business to meet our targets for growth in adjusted consolidated ROE and adjusted EPS, together with attractive shareholder returns. The roles of the Group also include the redistribution of capital to each business and the monitoring of performance. The current MTMP policy is to reinforce the capital remittances from businesses to the holding company. It also introduces the idea of maintaining a balance with the operating capital retained in each business, while providing full control to the holding company over any surplus capital. In addition, based on our new ROE target, we have increased the target ceiling for our measure of capital adequacy, the Economic Solvency Ratio (ESR), by 20pt to 250%.
We will strive to ensure we achieve the Group’s financial targets of adjusted consolidated ROE and growth in adjusted EPS by making the recycling of capital function more effectively, based on our steady implementation of the MTMP policies covering the three areas of risk mitigation and capital control, deployment of capital and growth investment, and shareholder returns.
Risk mitigation and capital control
We aim to completely sell down strategic shareholdings by the end of FY2030. The reduction achieved in FY2024 alone was ¥429.3 billion, substantially ahead of plan. Based on this result, we have upgraded the MTMP target for a total reduction in strategic shareholdings, from ¥600 billion to ¥800 billion. We aim to accelerate the pace of reduction further as we head towards FY2030, reallocating the capital generated to invest in organic growth, M&A and enhanced shareholder returns.
We also make strict decisions to exit various investment projects by setting clear criteria that take into account initial plans and changes in the business environment, working to rapidly withdraw from unprofitable investments and recover capital efficiently, while allocating the recovered capital to new growth investment opportunities. Elsewhere, while strengthening how we manage risks posed by domestic natural disasters, we will continue to reduce our exposure to unprofitable parts of the insurance portfolio.
Figure 4 Sale of Strategic Shareholdings / Balance of Strategic Shareholdings
Sale of Strategic Shareholdings
Balance of Strategic Shareholdings
Deployment of capital and growth investment
Under the current MTMP, we plan to deploy capital in four key areas: overseas M&A, wellbeing M&A, organic reinvestment and business base reinforcement. Capital deployment will be steady in each area,
but our aim is also to increase the effectiveness of these actions by creating a dual-unit business structure composed of SOMPO P&C and SOMPO Wellbeing.
Given that a certain scale of profit accumulation is essential to reaching our FY2030 goals, we acknowledge the need for M&A-derived inorganic earnings growth. From that point of view, our appetite would be strong for overseas acquisitions with potential for rapid earnings accretion and contribution to greater resilience, provided it cleared our hurdle rate and was a good fit in terms of investment discipline and culture. We would not hesitate in such cases. Our targeted regions remain the same, with a preference for North America and Europe, notably for commercial business. However, we are prepared to broaden our horizons. For M&A in the wellbeing sector, we are focused on investment areas to broaden our product and service base where we could utilize Sompo’s strengths and thereby contribute to the sustained growth of the Group.
We will continue to take a firmly disciplined approach, since M&A is a means to raise capital efficiency and not merely an end in itself. Based on valuation trends and other factors, in fact we did not make any large-scale acquisitions in FY2024. However, we did invest to promote organic growth, mainly in overseas insurance operations. We also deployed capital in insurance underwriting, led by high-margin segments, while broadening the Group’s credit investment portfolio as part of our asset management practices.
Human capital is a vital part of the Group’s strategy, and HR investments form one of the highlights of the current MTMP. We are also investing actively across data and digital to help promote innovation and enhance productivity.
Policy on shareholder returns
In principle, profits generated by each business are consolidated and managed by Sompo Holdings while maintaining a balance with operating capital levels retained by businesses. A portion of this collected capital is then returned to shareholders. Our policy is to fund continued DPS hikes from sustained profit growth, considering sound finances and market conditions. We will also conduct share buybacks flexibly depending on the share price and our capital situation.
Under the current MTMP, to enhance the predictability and stability of shareholder returns since the adoption of IFRS in FY2025, the policy sets the basic return at 50% of adjusted consolidated profits, based on the latest 3-year average. We aim to increase total return through earnings growth, translating over time into higher DPS, combined with share buybacks. As a rule, we plan to increase dividends in line with medium-term earnings growth, while also increasing the payout ratio applied to the basic return. On top of this, we plan to provide an additional return set, as a rule, at 50% of gains from sales of strategic shareholdings (on a post-tax basis). We will also consider capital adjustments if the ESR is consistently above the target range, subject to the status of risk, capital, earnings trends and financial market conditions.
The total return in FY2024 in line with the current MTMP shareholder returns policy was ¥385.9 billion, of which share buybacks represented ¥260 billion. Both figures marked new highs. Based on the earnings outlook for each business and a disciplined capital approach, we expect to achieve an EPS growth rate of at least 14% during the MTMP period. The initial DPS guidance for FY2025 is ¥150, an increase of ¥18 and the twelfth consecutive hike in annual DPS.
Going forward, we will seek to maintain attractive shareholder returns while emphasizing dialogue with market participants.
Figure 5 Shareholder Returns
- The Company implemented a 3-for-1 common stock split on April 1, 2024. In comparisons of DPS before and after the stock split, figures before the split are adjusted to level after the split (rounded to the nearest decimal place).
Figure 6 Shareholder Return Policy
Figure 7 ESR Target Range
Creation of dual-unit business structure (SOMPO P&C, SOMPO Wellbeing)
From FY2025, we are concentrating our operations into the two business domains of SOMPO P&C and SOMPO Wellbeing to help strengthen collaboration across business and regional boundaries. We aim to ensure consistent consolidated growth by applying an accelerated focus to the business unit themes of “increase resilience” and “connect and be connected.” With P&C insurance operations across 29 countries and regions, SOMPO P&C is building greater resilience coupled with risk-return optimization in an increasingly uncertain environment through an integrated global insurance business. To boost profitability,
we plan to leverage the integrated global balance sheet for efficiency gains in reinsurance, asset management and other areas; accelerate SJ-R initiatives by introducing insurance expertise from overseas; invest in geographically broader, more diversified overseas insurance underwriting capacity; and undertake growth investments. Meanwhile, to help alleviate the three concerns of health, retirement funding and nursing care, SOMPO Wellbeing is building Group-based solutions by expanding sales of Insurhealth®, developing its conventional nursing care capacity, and increasing sales of wealth accumulation products. The FY2030 target for SOMPO Wellbeing is adjusted profits of over ¥100 billion, based on sustained growth in Lifetime Value (LTV).
We will achieve the Group targets we have set of raising market capitalization to ¥6 trillion and adjusted consolidated profit to ¥500 billion, based on the successful growth of these businesses and the implementation of our financial strategy.
