Sompo Holdings Inc U/Adr

Very nice to see you all. So today we have business CEOs and I'd like to talk about the whole group first and then each business is going to be explained by each CEO. Let us start with the executive summary. So it's a busy page in short. As far as numbers are concerned, we are on track. That's my understanding. and we have about 15 billion yen upward revision of the the full year forecast compared to the original forecast and risk is reducing but when we look at external factors there are some inflational pressure and there are other factors of headwind, and each business is not complacent, not satisfied with the current status, and we'd like to control both risks. Let's move on. First, share prices. Finally, we have achieved adjusted PBR of one. When I became CEO, I talked with many people about PBR and ROE. I was asked to talk about PBR and ROE. And PBR1, when I was asked about PBR1, I said I didn't really stick to that idea, and I was criticized for that. is that the value of liquidation. And we are just starting point. It's just a yardstick for us. So we will not be complacent about the current status and we'd like to do a good work to raise our share prices. Next one. This page, we'd like to look back 136 years of history. Looking back 136 years, we have come through lots of M&A's, consolidations, and we have come to the current image. In 1888, the Dasompo's original company was established. and we have come through lots of changes since then through consultations and integrations with various companies to come up with the current PNDC business as to nursing care. Today, we have a representative from the SI. Now we have a good presence with that entity in the market, but we had to come through lots of challenges And we withdrew from the business. We divested, exited from the business if we found that there is no fit in terms of strategy. The same applies to Himawari Domestic Life. INA was bought in 2001, INA Himawari, and now the life company has a good presence in the marketplace. but that was after the acquisition and PMI to improve corporate value. For a nursing care business, we bought Watami Nokaigo and Message, and then we integrated the two companies. So we made lots of post-merger acquisition efforts. And we have come up with this very good company with good presence. But in the process, we also exited from some entities. And this page illustrates all that. Let's move on to the next page. It's a busy page, but in short, the message here is as follows. On the left-hand side, we have 2024 forecast market cap pushed by the share price increase. It's now a little bit below 4 trillion yen. And on the left-hand side, pie chart, by 2030, we will both market cap and adjusted profit. We'd like to double both of them Internally, we use the term mid to long term. On mid to long term, we'd like to be more clearer, much clearer by showing exact year. And so 2030, here, this is the to-be state by 2030. In the middle, the specific actions that we are going to take to achieve that, it's a big design. for the domestic PNBC business. It has faced lots of problems and issues and worked on seriously. And based on the business improvement plan, just to implement it will not be enough in this shrinking domestic market. the changing needs of the other customers so we need to regain customers trust and also we need to work on the the earning spaces that's why we are working on SCR and the profit and growth engine is our overseas business disciplined underwriting and investment and And geographical expansion is going on in a very steady manner. For well-being business, the core entity is Himawari Life. And the nursing care business, which makes SOMPO unique, we are going to make it more sustainable. And through that, we are going to improve corporate value. By 2026, the mid-term plan, under the mid-term plan, we'd like to accelerate that effort for P&C business. simple P&C, the concept is explained in the Midtown Plan. Both at home and abroad, we would like to integrate the P&C business. We would like to operate it in an integrated manner. The two strong balance sheets are going to be made stronger and come up with the optimal reinsurance and operation and at the same time center of excellence is to be accelerated both at home and abroad Optimal practice, best practice will be learned from each other. Simple Japan, for example, Turkey and their New York people visit Japan and retail underwriting know-how is not trying to implant it in Japan. That should be done, two-way manner, between Japan and outside Japan. And that's what SOMBU Japan aims for. SOMBU Wellbeing, the Himawari Life, has insured health business, which is to be upgraded, strengthened. And nursing care business, in the shortage of labour force, we'd like to sustain our nursing care business, sustainable nursing care business, future nursing care business. That is not enough. Healthcare data will be connected. so that many customers, users, will be able to think about positively to live long. So that healthy lifespan or improve the concerns of nursing care or after retirement, the fund, and that will be part of the pieces And as a result, by being a companion for our customers, we are going to expand ATV and we are going to make efforts to improve enterprise value. But for the well-being, it is capital right business and the low co-relationship with the rest of the business. So that will certainly improve the value of our corporation. Next. Now, we'd like to talk about the progress in management targets, especially two important ones, LOE and EPS growth. In short, they are on track And in fiscal 2024, we will hit a plateau due to the temporary sluggish growth of profits in the domestic P&C business while strengthening the foundation for the future. But as I mentioned earlier, the earnings are improving, so we think that the things are on track. 2024, as the adjusted The profit has been revised upward by 15 billion yen. And as to for 2026, ROE 13 to 15% and more than 12% for adjusted EPS growth. They are progressing very well. Page 9, please. So the progress toward improving profitability and earnings stability. And I'd like to pick up some big items here. Whether it is LOE, of course, the profits are the key. For domestic P&C, the progress has been made in improving earnings of fire insurance, which has been a long-standing issue. A profit recovery of over 70 billion yen is expected due to rate revisions. And as to from the center of excellence perspective, The portfolio is steadily improving through strengthened underwriting and collaboration. The quality of portfolio itself is improving. For overseas business, disciplined underwriting is the key, and we are working on that steadily. Not just now, but for the future, we are making investments. Namely, we are expanding geographically, as I mentioned earlier, and we are actually making more progress than expected. And we are looking at the revenue increase of over $400 million. In addition, This year, we were exposed to secondary perils, and that impact has been controlled with the members from outside of Japan. We say that we can control portfolio, although we cannot control natural disasters. So the impact coming from NatCat is becoming smaller. Next page, please. The next keyword is the cyclical management of capital. In the Mid-Term Plan, 1.2 trillion and the 300 billion from the risk reduction, the total of 1.5 trillion in capital is to be generated. 1.2 trillion is from the accumulation of profits. And that will be used for our gross investment and striking a good balance, not only for the short term, but to increase the value on the longer term. 2030 adjusted profit is to be doubled and the corporate value is to be doubled.

Moving on to page 11. Here, we are talking about M&A and the growth investments. Well, after the endurance deal, as a matter of fact, that's been the exit of the canopies of Skoll or Lloyds. So the exits have made the progress. And by utilizing the platform, Simple International has been growing steadily. ROI is 16% and over. Well, regarding M&A, we cannot always make a success. Sometimes it's a good case, sometimes unfortunately not. But we have a track record of achieving sustained growth by aggressively and boldly taking on and succeeding growth investments. As mentioned at the beginning, the stepping stones of how we have been growing. So growth through M&A is something that we have to be actively working upon. for domestic Japan for the differentiations, the investment in JBR, or well-being, connected and be connected, fitness, rise up, chuckles up, the direct investment in those entities, and also for Palantir. It's not only the absolute return, but also the capital, and also the boundary solution that the Palantir has. is going to be used for our business practically, so that Ishikawa-san is going to probably talk for the domestic business and also Narasaki-san for the DX side. But this investment in volunteer has been strategically quite important for us. Moving on to page 12. Well, our main business is of course the insurance. That's the core business for us. So the underwriting profit is an important factor Well, this earnings coming from the underwriting profit is steadily growing, and the fire insurance, which has been the long-term challenge, have been taking up initiatives, not only pricing, but also the underwriting reinforcement and portfolio. And for the automotive insurance, the impact has still been lingering. So the initiatives on the car insurance is going to be ongoing. for the overseas business, as I mentioned earlier. Right now, the underwriting profit and for the investment side of the profit have been steadily growing. But when we look at the future, we have to think about the geography expansion for the further stable business performance. So the geographical expansion is going to continue steadily, as you see on the right-hand side. On page 13, we are talking about the further risk takes. Well, it's about the investment as a group, as a whole. As you may remember from the previous mid-term plan, the capital transfer to SI had increased the AUM and also the underwriting capability was expanded. This was initiatives under the philosophy of one simple project. and the effect is already close to 20 billion yen to bottom up the profit. The 2024 group investment profit is expected to be about 30 billion yen higher than the initial forecast. So we shall continue to strengthen our investment while paying attention to the changes in the investment environment And of course, we have to think about what we need to protect and what kind of rules and regulation we have to abide by. And then think about the appropriate asset allocation to get the profit out from the investment. On page 14 is the well-being business. For the time being, this is going to be coming, the main core is going to be the human life, ensure health business. And the steadily human rights margin is expanding. With that as the core, as I mentioned, We have to think about the expansion of the long-life and also providing the solution for any concerns, and then think about the expansion of the business in terms of the financials. The details will be explained later by Watanabe-san. On page 15, in terms of risk reduction, at the time of the announcement of the meeting plan this year, we were talking about the 200 billion yen. At the minimum, that was what we have said. Right now, we dream that the midterm plan target of 600 billion yen was the target for the initial target of 200 billion. That communication is something that we value still now. or mainly with the sales force. We've been explaining that carefully. And we are also explaining about why it is important for us to make a decision of slowing down of the equities holdings. And the market has started to understand our speed of the risk reduction has been accelerating. The 600 billion yen during the midterm plan target is going to be just canceled and there will be discussed for revision, whichever the case is. The cash generated from the sale of strategic shareholdings. How to use it will make a decision for the future of this company. So that will be done with an emphasis on a balance between investment future growth and the shareholder return with our commitment. Page 16, please. Here we are talking about the shareholder return. During the current mid-term plan, we are going to be accelerating the pace of increasing the ordinary dividends from 12% hike level to 32% hike level year-on-year. And as was mentioned last week, the company announced 155 billion yen share buyback, its largest ever as a company. Well, the level of ESR that we are committed to has to be monitored carefully and also the ROE level that we've been communicating and also the EPS growth commitment. All of those factors need to be considered. and then the return to shareholders to that level was necessary. That was our management decision. So we recognize the most important is to balance short-term capital efficiency improvement with investments in sustainable growth. And on page 17, this is the progress in human resources strategy, the corporate culture change, especially for the domestic business. We have talked about a lot of status quo bias, especially in the domestic operations, so that we shall renew the corporate culture, review code of conduct, and the value standard. We've been working that across the company. For the group, the single largest asset is the human resources, the human capital. So the investment in the human resources is the most essential for the growth of the company. So in the very beginning of the year, we said that spending in the human resources is going to be prepared for 30 billion. That's going to be earmarked to make sure that we have enough people and to spend enough on the human resources. And also for the corporate value increase and the stock performance improvements, we want to make sure that group employees are going to be feeling the same so that we'll consider introducing a stock compensation program for the group employees to increase corporate value in concert with employees. We are going to make some announcement later on. because the staff and the shareholders are going to be in alliance and then move towards the better value creation. On page 18, This is the digital strategy. Narasaki-san is also attending this meeting, and I think he is going to talk about the digital strategy. But this digital and AI, the utilization of those digital have been done by all the relevant parties. And since the beginning of the year, the group CEO, I've asked the group CEOs talking about that the goal for this year is for everyone to benefit from digital and AI. Well, exploration of the edge technology is, of course, important. However, we have 70,000 people under our umbrella. So for all those people, intentionally or unintentionally, if they can feel the advantage of the AI, then that's going to be fabulous. And when it comes to risks, the infrastructure that they feel safe to use is most important. So the specifics will be explained later of how AI has been implemented on site. So lastly for my part is on page 19. Again, there are two indicators that we are paying attention to. Those are EPS growth and ROE. For those two yardsticks, sustainable growth and profit is going to be important, and also the assets that we get from the investors needs to be appropriately managed and controlled. So, as I may be repeating, the profits that we are going to be generating, and also the cash generated from risk-taking is going to be based upon the balance between the return and also the investment. So we are going to walk the talk. As a result of which, the year FY 2030, the profit level and the corporate value will be doubled down, and then we will be taking the measures of increasing resilience and the Also, we are going to be talking about the safety and the well-being for the future for Semple Group. Now that's all about for my part. Now, Ishikawa-san is going to talk about the domestic business.

Now, here is Ishikawa, CEO of Domestic Beyond the Sea Business. Page 21, please. So let us reconfirm based on the reflection of the past year. The basic stance dedicated to customer society and our values. And we are going to realize a new sample Japan that is unique and resilient. And the entire company is now working together to achieve this. As you can see, for that we have SJR. The two axes, first financial one, the reform of the earnings and its foundation, and also the non-financial portion, the two strengthen the culture and the quality on the longer term. Next page, please. So here, I'd like to introduce the overview of the progress made in each initiative of SJR. First, in the area of the financing, the portfolio of underwriting reform is happening through rate revisions based on policy and underwriting control. The key to portfolio reform is segment analysis and portfolio management, which in turn improves pricing and underwriting technology and the qualifying risk appetite. The revision of fire insurance and automobile insurance implemented this year, here we have made it a top priority to improve the portfolio and earnings. And in accordance with earnings status of each segment, And as to the other area, which cannot be covered by pricing alone, we did so through underwriting. And as to in retail sales area, we are focusing on standardizing sales activities, completing the process through agencies and improving productivity through digitalization. We have already started full-scale efforts towards standardization using FSA tools for the second half. In the commercial area, The competitive environment is undergoing drastic changes partly due to efforts to reduce strategic shareholdings to zero. So the key for us to survive and demonstrate value in this environment is to provide expertise and comprehensive solutions based on that expertise. And we have established a training system for all corporate sales staff and have already begun a pilot rollout, advanced specialised training developed in collaboration with external consultants, mostly, in the insurance claims service and its reform. We are in the midst of a pilot rollout aimed at transforming operations into a divided and a concentrated one. We are implementing measures such as expanding the coverage scope of case management and centralizing triage by dividing up the work of fraud detection, and we are making steady progress with a sense of definite change in both areas. Let me also explain the non-financial area. Last fiscal year, we caused a great deal of inconvenience and concern due to a series of problems, but as we have begun to implement various measures, the score on the cultural change survey, which indicates the degree of cultural change at the company, is improving, and we are also beginning to see signs of gradual improvement in customer relations evaluations. such as NPS. And with that, I would say that we have come out of the worst situation. Through NPS, we are also starting the development of human resources. These efforts to strengthen our business infrastructure might not have a high profile, but they are essential pieces of sustainable business operations and strengthening competitiveness, and we will continue to make steady progress. Now, let me shift gears a little bit and explain the progress of our specific plans. First, about LOE. We are aiming for an ROI of 8% or more by the end of the current mid-term plan. And the effect of HJR are yet to be apparent and various upfront investment costs are mounting. So the planned figure was 1.5% for FY2024. For the combined ratio, we are almost on the track. As to strategic shareholding, thanks to the efforts of sales department and others, we have been able to have speedy and careful dialogue with issues, and we have almost achieved our initial target in the first half of the year. So we doubled our full year forecast to a reduction of 400 billion yen. Next page, please. Automobile insurance. As Mr Okumura mentioned, the earnings environment for automobile insurance continues to be extremely severe due to rising repair costs and an increase in secondary periods such as those caused by hail in particular. As we have already announced, The rate revision in January 2025 will be the first and biggest step toward improvement, but we believe that this alone will not be enough to overcome the current severe environment. We will consider further revisions based on the revision of the advisory rate, and at the same time, we will work on individual underwriting measures. And in doing so, we will refer to the specific figure of 5.7%. And as to micro-segment underwriting measures and those which cannot be covered by pricing and strengthening disaster mitigation and full detection in cooperation with the insurance claims service department will happen. At the same time, we are going to achieve early improvement of earnings. Next page, please. Fire insurance. Core underwriting profits of fire insurance are expected to be in the black in FY24, as was the case for 23. And I think it is fair to say that the improvement of earnings is on track. We are also making a steady progress in our pursuit of profitability, agility and stability, which are the concepts of our portfolio reform. For example, Compared to the last revision, in the rate revision most recent one implemented in October this year, we were able to reduce by almost 90% last-minute early renewals just before the revision month, which would have diminished the effect of the revision by controlling various underwriting rules. We are also actively controlling the underwriting of old properties and high-loss industries, which are issues in our portfolio. And the new business ratio of old properties has decreased significantly compared to June 2023, before the implementation of measures. We started to take measures in July 2023. Since then, we have seen improvements.