Management Message

The world is undergoing VUCA (Volatility, Uncertainty, Complexity, and Ambiguity). Events unimaginable in the past have occurred in quick succession and with immense impact on our daily lives, from the normalization of extreme weather and severe natural catastrophes, to rapid advances in artificial intelligence (AI), the COVID-19 pandemic and soaring energy and resource prices due to Russia’s invasion of Ukraine. In an increasingly chaotic world, we cannot predict the future even a few months ahead, let alone in a year’s time.

All the more so because of the world we live in. Each person needs to think proactively, flexibly adapt to changes and overcome many challenges. There is no time to stop and think. Individuals with personal identity and organizations, a group of individuals, need to think about the ideal nation and society, and try to make innovation happen no matter small it may be to realize a society with high levels of happiness. I call this a “Society Co-Created by Seikatsusha” that would be realized by various stakeholders coming together.

This Japanese term “Seikatsusha” encompasses individuals in their multiple roles or experiences, from that of a family member, to being a consumer, a workers, member of organizations, and as one of a group of individuals. As members of a “Society Co-Created by Seikatsusha,” firms need to broaden the diversity and talent in their organizations, and to drive even more innovation to create “happiness” in many facets for all stakeholders in society. I believe that a precondition for this is inclusion where a diversity of individuals are valued and respected, and that “purpose” forms the foundation of inclusion.

SOMPO’s Purpose is to “create a society in which every person can live a healthy, prosperous and happy life in one’s own way with “A Theme Park for Security, Health & Wellbeing.” It sets out the social challenges that SOMPO should address, values delivered by SOMPO to the society, and approach to fundamental needs and values of humans to “live in good security, health, and wellbeing.” It also indicates the future direction, such as common goal and mission, of diverse businesses and employees of Sompo Group.

At SOMPO, we are working to put our unique “purpose-driven management” at the heart of our business management. This ‘SOMPO style’ is expressed in the diversity of our business segments and purpose-driven management. The Group’s diverse business segments, including insurance, nursing care, and digital, work along a common “Theme Park” strategy, and coordinate and cooperate across business boundaries to deliver on SOMPO’s Purpose. This initiative is driven by the intrinsic “My Purpose” of our individual employees and their diverse backgrounds, and is pushed ahead by unleashing their capabilities to the fullest. This is what I consider purpose-driven management that is unique to SOMPO. SOMPO aims to become a corporate group that creates various innovations to increase the happiness of multiple stakeholders by practicing purpose-driven management unique to SOMPO.

Efforts that form the basis of purpose-driven management, are termed “non-financial” initiatives. These efforts do not directly increase financial value, but aim to raise financial value and enterprise value in the mid- to long-term. In terms of the social value created by firms, stakeholders expect firms to work on addressing greater social challenges and deliver value. This is exactly why firms exist. The firm needs to communicate eloquently, based on evidence, about how to enhance enterprise value by commercializing “non-financial” initiatives, which social challenge the firm tries to address, and its unique social value. Together, these eventually raise enterprise value.

At SOMPO, value created by such initiatives that raise financial value and enterprise value in the mid- to long-term is what we call “Unrealized Financial Value.” We will increase these initiatives on a group-wide basis while ensuring these help raise financial value and enterprise value. Employee engagement is high at diversified organizations, while financial performance is strong at highly engaged organizations. We leverage various metrics to measure and analyze these correlations as we pursue internal and external routes to help increase financial value and enterprise value.

An initiative unique to SOMPO that creates enormous social value is “egaku,” a Real Data Platform for Nursing Care that we commercialized in FY2023. Predictions are for a labor supply and demand gap in nursing care, as a result of low fertility and the aging population that would result in a system collapse by 2040 in Japan and later occur in other countries. By visualizing and analyzing real data, such as daily vital data of care home residents, “egaku” enables the best care for each person. It also brings other benefits, such as improvements to productivity and the quality of care. It allows employees to focus on the care services that only humans can provide, making time for employees, and increasing employee satisfaction and engagement. We will roll out “egaku” to the entire nursing care industry, not just in SOMPO. We aim to make this service a de facto standard in the nursing care industry helping to close the labor supply and demand gap in nursing care, which is predicted to widen to 690,000 people in 2040. We will also contribute to a future society where everyone can receive nursing care when needed.

According to our estimates, “egaku” would close the labor supply and demand gap in nursing care by 220,000 people and create GDP-equivalent social value of 3.7 trillion yen (US$ 27.8 billion). I have not heard of any other effective solution, in Japan or around the world, that helps close this labor supply and demand gap in nursing care, so SOMPO will confidently forge ahead to address challenges facing the world, not just Japan. We will support as many seniors as possible, steadily work on creating value by changing the future of nursing care, something only SOMPO can accomplish, and enhance enterprise value.

Lastly, I will touch upon the Mid-Term Management Plan.

Sompo Holdings, Inc. was established in 2010 with the integration of two Japanese P&C insurance companies. Since then, we have aggressively transformed the group to establish “A Theme Park for Security, Health & Wellbeing,” a unique business model in the world, and to be “indispensable.” In our core insurance business, we have worked to build a business portfolio conducive to further growth and resilience by improving the profitability of our Japanese P&C and life insurance companies. We have done this through integration, and by establishing a global platform with the acquisition of a large foreign insurance company. We have steadily built a business foundation to realize “A Theme Park for Security, Health & Wellbeing” by fully entering the nursing care industry in 2015, investing aggressively in the digital business since 2016, and forming an alliance and strong partnership with Palantir Technologies.

Our goal under the 3-year Mid-Term Management Plan which started in FY2021 is to realize “A Theme Park for Security, Health & Wellbeing” based on these foundations.

The focus of the 3-year period is to deliver on our purpose, and the Group has worked as one in implementing initiatives. As a result, the Overseas Insurance and Reinsurance Business has become a driver of the group’s growth and established a strong financial foundation which is integral to forging ahead to realize our Theme Park vision. The wealth of real data derived from our diverse businesses, which is one of SOMPO’s strengths, is utilized through “egaku,” a new business that creates enormous social value. In FY2022, we missed our adjusted consolidated profit target due to one-off effects but in FY2023, adjusted consolidated profit is expected to reach a new record high of 280 billion yen, and the ROE target of 10% is likely to be met. As Group CEO, I feel confident about our accomplishments towards our Theme Park vision, which we have been working on for more than 10 years.

However, if asked whether SOMPO has yet realized our Theme Park vision and became indispensable, I have to answer not to the degree I had hoped, and we need to continue the pursuit. As Group CEO, I will work closely with Mikio Okumura, our Group COO, to accelerate purpose-driven management unique to SOMPO, increase workplace diversity based on inclusion, utilize data and digital technologies to their fullest, and continue to create new value that helps to address social challenges. I will work to ensure SOMPO becomes the corporate group we aspire it to be, and to make SOMPO indispensable by ensuring we deliver unique value in the world.