Ms&Ad Ins Grp Hldgs Ord

Ladies and gentlemen, esteemed investors and analysts, thank you very much for taking time out of your busy schedules to join today's earnings conference call for MS&AD Insurance Group Holdings, Inc. My name is Hayashi from the Investor Relations Department, and I will be serving as the moderator for this session. I appreciate your kind attention and look forward to your participation. Today, in addition to myself, Hayashi, we are joined by Mr. Nakayama, General Manager of Accounting, as well as members from the Investor Relations and Accounting Departments. The presentation materials are available on our company's website under the investor section specifically in the IR events area listed alongside the earnings release and the other related disclosures for the fiscal 2025 full year results. Please have these materials at hand as we proceed. Please note that the results for fiscal year 2025 are presented in accordance with Japanese accounting standards. while the forecast for the fiscal year 2026 are based on IFRS. As with our previous conference calls, we have included a summary of today's presentation in the material. Therefore, at the outset, I will focus only on the key points, and we will dedicate most of the session to the Q&A. We aim to conclude the entire meeting in approximately 45 minutes, and we appreciate your understanding. Furthermore, please be aware that today's presentation may include forward-looking statements based on our current forecast. Such statements are subject to risks and uncertainties, and actual results may differ materially from these projections. We kindly ask for your understanding in this regard. Now, let me briefly outline the key points of our financial results. The key highlights for today are shown on page 4 of the presentation materials. For the full fiscal year 2025, consolidated net income reached a record high of 787.3 billion yen, an increase of 95.6 billion yen from the previous year. Group-assisted profit, which serves as the basis for shareholder returns, also marked a record at 1,000.9 billion yen, up 269.1 billion yen year-on-year. Let me begin with an overview of our full year results for fiscal 2025, starting with the top line figures. Please turn to page 11 of the presentation materials. Net premiums written at our domestic non-life insurance businesses increased by 122.6 billion yen year-on-year, reaching 3,269.6 billion yen. This growth was mainly driven by higher revenues in automobile and fire insurance, reflecting the impact of rate revisions. Premium income from our domestic life insurance business increased by 100.6 billion yen, reaching 1,741 billion yen. This growth was primarily driven by higher sales at Mitsui Sumitomo Primary Life Insurance following product revisions. Net premiums written by our overseas subsidiaries rose by 207.8 billion yen year-on-year to 1,735.1 billion yen. This increase was driven by revenue growth across all regions with particularly strong performance in the Americas and Europe. Next, I will discuss our profit on a financial accounting basis. Please refer to page 12 of the presentation material. Consolidated net income for our two domestic non-life insurance companies increased by 49.3 billion yen, despite the burden of merger-related expenses. This growth was mainly driven by higher premium income, a decrease in natural catastrophe losses, and increased dividend and interest income. In the domestic life insurance business, net income decreased by ¥74.9 billion year-on-year. This was mainly due to Mitsui Sumitomo Airoi Love Insurance reporting a loss of ¥51.9 billion as the company proceeded with the sale of yen-denominated bones in its Available for Sale Securities portfolio to eliminate unrealized losses. Our overseas insurance subsidiaries recorded an increase in profit of 77.4 billion yen, mainly attributable to higher revenues in Europe and the Americas, as well as a decrease in natural catastrophe losses. Please turn to page 13 for details on the group-adjusted profit. Driven by significant profit growth in both our domestic non-life insurance and international businesses, group-adjusted profit increased by 269.1 billion yen year-on-year, reaching a record 1,000.9 billion yen. Next, please refer to page 17 for an update on our ESR. As of the end of March, 2026, ESR declined by 12 points from the previous fiscal year standing at 214%. Now let me move on to our earnings forecast for fiscal year 2026. As announced in our news release dated March 30th, the company will voluntarily adopt IFRS for its consolidated financial statements starting with the securities report for the fiscal year ended March 2026. Accordingly, please note that our earnings forecast for fiscal year 2026 are based on IFRS. Before presenting our earnings forecast for fiscal year 2026, let me first explain our fiscal 2025 results on an IFRS basis, which will serve as the basis for comparison. Please turn to page 14. While group adjusted profit under Japanese accounting standards was 1,000.9 billion yen, adjusted profit on an IFR basis was 918.9 billion yen. This difference was mainly due to the recognition of losses on honors contracts in the domestic wildlife insurance business and the impact of eliminating timing differences resulting from the alignment of fiscal year ends in overseas operations. Now, let me explain our earnings forecast for fiscal year 2026. Please refer to page 30 of the presentation materials. As illustrated in this waterfall chart, we are forecasting adjusted profit of 800 billion yen for the fiscal year ending March, 2027. Excluding gains and losses from the sale of strategic equity holdings, we predict adjusted profit from the domestic long life insurance businesses to be 170 billion yen, roughly in line with the previous year. This reflects our expectation of increased revenue offset by a projected rise in natural catastrophe losses. For the domestic life insurance business, we expect adjusted profit to be 52 billion yen, also roughly unchanged from the previous year. The positive impact from the absence of Mitsui Sumitomo Ayo Life Insurance's bond sales losses is expected to be mostly offset by a decline in investment margins at Mitsui Sumitomo Primary Life Insurance. For our international businesses, we are projecting adjusted profit of 300 billion yen, an increase of approximately 4 billion yen year on year. While we anticipate natural catastrophe losses in Europe to be in line with the historical average and have factored in the absence of gains from the sale of shares in Challenger Limited in our overseas life insurance operations, we expect profit growth in the Americas primarily driven by equity in earnings from W.R. Berkeley Corporation. On balance, these factors result in a modest increase for the segment as a whole. On a consolidated group basis, excluding gain from the sales of strategic equity holdings, we expect adjusted profit to be 532 billion yen, remaining at the same level as the previous year. This forecast reflects the positive effects on ongoing initiatives such as rate revisions. While assuming natural catastrophe losses, both in Japan and overseas will be in line with historical averages. Finally, let me address our policy on shareholder return. Page 8, please. For fiscal year 2025, in addition to the interim dividend of 77.5 yen per share already paid, we will pay a year-end dividend of 82.5 yen per share. This brings the total dividend to 160 yen per share, representing an increase of 15 yen compared to the previous fiscal year and 5 yen compared to our initial forecast. In addition, we have decided to repurchase shares up to a maximum 265 billion yen as part of our basic shareholder return policy, of which 75 billion has already been executed. Furthermore, for fiscal year 2026, we project an annual dividend of 170 yen per share, which represents an increase of 10 yen from the previous year. In addition to this, we plan to repurchase 80 billion yen of our own shares during the first half as part of our basic shareholder return, and combined with 190 billion yen linked to the previous year's results, we intend to repurchase a total of 270 billion yen worth of shares in fiscal year 2026. I would also like to note that our growth strategy, as well as topics such as the reduction of strategic equity holdings, will be addressed in greater detail by management at the information meeting scheduled for next week on May 26. That concludes my remarks. We will now begin the Q&A session. First of all, Sato-san, JP Morgan Securities, please.

This is Sato from JP Morgan. I have two questions. My first question is about international especially MSM-Win and MS-Reef. the impact of the historical avalanche. I'd like to learn about the attribution of the project excluding natural catastrophe, and I'd also like to learn about the impact of the market softening. And my second question, so you have updated your method management plan, and I think basically it is in line with what you have disclosed at information meeting, however, I'd like to learn about the points you have revised. Thank you. Mr. Sato, thank you very much for your question. I'd like to double-check your questions. Your first question was about Europe, especially MS Amelin and MSV, excluding natural catastrophe. So what's the project or the projection of a traditional loss and also the impact of market softening? And your second question was about whether we have revised our medicine management plan, and if so, what are the points we have revised? This is Nakayama from accounting. Thank you very much. From myself, I'd like to address your first question. We're reading MS Amelin FY26 earnings forecast, which is on page 50 and 51. We do have the earnings forecast of MS Amelin and MSV. Starting from this time, as we have moved to IFRS for Obviously, subsidiaries, we are based on April to March. And in the previous year's number, the number 525, it is also translated into April to March numbers. So that is why we do have some discrepancy with JGAG-based numbers, which we do have at the later part of the presentation. So, again, this is April to March basis. And when you look at the loss ratio on page 50 for MS Amelin, changed from 53.7% to 59.1% and excluded natural catastrophe for MS amylin, it was one point improvement. On the other hand, regarding MSV, if you refer to page 51, loss ratio has decreased increased from 71 to 77.5%, and excluding natural catastrophe, it was 7, excuse me, 3.7 point increase, so it was increased. And there's the impact of market self-turning as well, so that we have already incorporated the impact into these numbers. And the excluding natural catastrophe for MSV However, there is the discount impact for IFRS, and for FY25, discount impact went bigger, and also for FY26, it is smaller. So that is why it looks like it has increased. So that's all for myself. For your second question, this is Hayashi. I am going to address your question. So today, at the timing of a financial results announcement, we have presented our management plan. Last November, we have presented 2030 as a profit target. Based on IFRS, we have presented $764 billion, and now we do have the higher possibility to achieve this target for 2030 target. Even though we have presented it as $700 billion, now that we have increased the number to $800 billion, and for other including initiatives, we really haven't made major revisions. Understood. And regarding my first question, the impact of market softening, according to what you have said, regarding MS Amelin, it's improving, and also for MS Re, there is the bigger impact of the fluctuation. So even though there is the impact of market softening, however, you have been successfully managing that. Is that okay to understand that way? Yes. Thank you. Mr. Sato, thank you very much. Mr. Muraki from SMBC Niko Securities, please. This is Muraki from SMBC Niko Securities. I have two questions. My first question is regarding the projection of the auto, the insurance, and how do you see the necessity to increase the premium. And on page 21, there's a number based on Japanese standard. However, with IFRS, there's a projection of a two-point improvement for automobiles. And I would like to learn more about the projection. That is my first question. And then my second question, when how we should see top line growth of MSV and also the American company. So I think MSV had 15% growth of top line last year. And also based on IFRS for the coming fiscal, the 15% growth is projected. However, There's companies such as Munich Lee, which get higher impact of market softening, and also they are experiencing reduction of revenues as well. My understanding is that you are strengthening your American base. However, there's still less on the growth of top line in some companies. So there are some companies which... Not really glowing. However, I was wondering how I should interpret the two-digit top-line growth. Let me confirm your question. Your first question was about FY26, the auto insurance projection, and your second question was about MSV and also the America's top-line growth. Regarding your first question, this is Nakayama speaking. Alleged in FY26 auto mobile projection, I would like you to refer to page 38. As Mr. Muraki mentioned, we are projecting a 2% improvement excluding natural big catastrophes is the four-point improvement. And as you may understand from appeal, there is the impact from onerous contracts. That is why we are projecting slight improvement. And we have been working on rate revisions. When we have Apple to Apple comparison, still we are projecting improvement. And regarding rate revisions, I'd like to ask Mr. Hayashi to answer that point. Regarding rate revisions, at this point in time, we have nothing finalized. However, as we have been explaining to you, the ratio we would like to achieve is the for the ratio we would like to achieve, but we still have several things to consider. May I move on to the next point? Recurring page 38, loss ratio based on IFRS, There is the loss from the onerous contract of FY 2025. Are you saying that is it going to decrease in the coming fiscal? Regarding onerous contract, there is the change of the estimate. However, For this time, already in my answer, I included the natural catastrophe and also the onerous contract. However, still, we are projecting the improvement of the auto. So you can understand that it is improving even based on our traditional, the Japanese-based standard.

Let me move on to the second question. which is related to the top line. In 2026, the guidance is available on page 49 for our international business. And as you are aware of, Europe, we're expecting 169.9 billion yen revenue increase, which does include MS AMRIN. And America's 155.5 billion yen revenue increase is including the United States. And MS3, As Muraki-san is aware of, over the past several years, we've been able to keep growing the business, although the market has been softening. And in a tree, these insurance companies, they are directly affected by ADE softening situation. Their top line has been affected. But in a tree, these insurance companies, these user-sized companies, their portfolios are being matured, I will say, But our business, MSV, they are still under development, so the phases are different. Under such a circumstance, we can defer to the rate and we can choose the classes or lines that are not facing softening situation. With that, we are aiming to further grow our business. So we've been growing until now, and even as of today, we are expecting to further grow our business. Reinsurance customers, we are being able to maintain good relationships. That should be also enabling us to reach out to attractive contracts. That's another reason why we're being able to go. We're not competing based on pricing. That's not the case. and the Americas. The Americas, yes, a top line is growing. This 155.5 number is there, and 2026 top line growth is affected a lot by the foreign currency exchange situation. If you look at page 49, close to 400 billion yen, top line is growing, out of which foreign currency impact is equivalent to 160 billion yen, which is included in this 100 billion yen number. So if you do the math, maybe the actual growth is 240 billion yen. And as you know, if we switch over to FISS, the ordinary profit is going to be cross-profit based. And we have a front retail business in the U.S., and they are going to enhance the new program on a cross basis. It may seem we're expanding a lot, but in terms of actual underwriting, the premise written, not necessarily. So top line growth, you see on page 49, again, that is incorporating foreign currency, positive impact. That's it. Fully understood. Thank you. Thank you very much, Mr. Muraki. Next, Miseho Securities, Sakamaki-san, please. I am Sakamaki from Miseho. My question is about your guidance. I have two questions. First, page 30, waterfall chart, international business, Europe, Americas, life insurance. If we do the math, I don't think the number makes three, nine. What are the other factors we can take into consideration? and the Americas WRB, what kind of contribution you're expecting and what is the organic growth you're expecting? My second question is about natural catastrophe impact. Now, the accounting is going to be different, so it may be difficult to compare, but you are increasing your budget in Japan, and maybe you are downsizing your budget in overseas. Am I correct? Let us double check your questions. First is about page 30, waterfall chart. The difference in the numbers for our overseas international business and WS Barkley contribution. That was your first part of the question. And the second part is the impact coming from natural catastrophe, especially in the overseas markets. Mr. Nakayama will answer to the question. If you compare 25 and 26 on page 30, the difference is 3.9. And if you also look at page 48, you will see numbers by region. 615, international life insurance, 275. We also have Asia, minus 3.2, and other adjustments. which is minus 173. That should be the breakdown of the numbers. I hope I could answer to your question. All right, I was missing this page 48, thank you. Next, let us know about the Berkeley situation. WRB, if you look at page 48, The market plus 655 is including the equity method profit coming from WRP Berkeley as well. And this is a listed company, SEC. So we cannot mention the specific numbers, but again, certain number out of this 65.5 is coming from WRP Berkeley. Again, they are listed in SEC. So there is market consensus number available. And we do not have any internal or number. So we are based on the market consensus. I think we are incorporating like 15% of the market consensus. I think, I hope I could answer your question. Yes, thank you. Natural catastrophe, the prerequisites. If you look at slide number 28, you will find left-hand below domestic, 150 billion, and last year's 124.7. So we are expecting kind of a negative rebound following the previous fiscal year. Overseas, we're expecting 64 billion for natural catastrophe. Last year, 54.2. We are not kind of being optimistic or under-evaluating the situation. We're just incorporating expected average situation. When you switch over to IFRS basis, what is going to be the average year basis compared to JGAP? For domestic business, can we expect the average base to be the same? Thank you. Shifting to IFRS, natural catastrophe assumption, we are not revisiting. So basically, the division remains the same. Specifically speaking, IFRS is, Are we going to do some discount? Or is it going to be gross basis? What kind of risk factors? So, vertically speaking, these details may need to be considered. But we're talking about natural catastrophe. It's not something we can kind of adjust. So, the definition is going to be the same. It's going to be net basis, Japan base. And we're just handling or treating the same as before. Of course, the bigger the company be, the natural catastrophe loss It's going to be expanding. So depending on the scale, the size can be different or become bigger. Understood, thank you. Thank you, Mr. Sakamaki. Next driver securities, Mr. Watanabe, please. This question is related to the Middle East situation. The marine insurance With your domestic business, what kind of assumptions do you have? And if you have already, for the current fiscal year, are you expecting any negative impact? The second question is shareholder return. You have upward revised DPS expectation, and should we expect that the dividend increase speed is going to be faster in the future accordingly? Thank you. Let me confirm your questions. First is about the Middle East. What kind of impact are we expecting? Second question is related to the shareholder returns. Thank you.