MS&AD Insurance Lags Tokio Marine in Efficiency, but We See More Upside to Intrinsic Value

We think Japan’s nonlife insurance sector has more appeal as a long-term investment than most other areas of Japanese finance because industrywide return on assets, or ROA, has roughly doubled after the last round of industry consolidation in 2010. Three firms--Tokio Marine, MS&AD, and Sompo--control around 88% of the market, and only three others (AIG, the nonlife unit of an agricultural cooperative insurer, and Sony Assurance) have even 1% shares.