Sompo Holdings Inc U/Adr

My name is Okamura, Group CEO. Thank you very much for joining us today despite your tight schedule. the reorganisation of the group, Simple Beyond Sea and Wellbeing. This is the very first IRL meeting after the reorganisation and the top business tops of each of the businesses are here with us today to talk about progress that they have made. Please look at page three. So this is an executive summary, actuals of FI 2024 and the progress on the management plan and the long-term vision toward 2030. Starting with the actuals of 2024, for metrics, for numbers, we have made very strong progress. That said, We were helped in many cases by external factors, so we need to continue to increase resilience so that we can achieve health, well-being and financial protection of the other Sumpo countries. Fortunately, for two consecutive years, since the launch of the holdings, we hit the record high, the perfect, and also we renewed the highest share for 29 times. And we would like to maintain this momentum. As to the mid-term management plan, we have two goals, ROE, improvement of ROE, and EPS growth. We are making lots of efforts on these two fronts. As to EPS growth, our pace is faster than our expectation. As to ROE, as I'm going to touch upon later, there's some challenging part left. We would like to take risks while making a gross investment to achieve absolutely this LOE target as well. On the long run, long-term vision, last fiscal year, we made a promise. Namely, by 2030, we are going to double the adjusted profit and double the market cap. The 500 billion yen for the adjusted consolidated profit and 6 trillion yen level for market cap. So the increased resilience and connect and be connected to these initiatives should be accelerated. That's important. And I'm going to talk about that as well. Please look at page 5. So for 2024, 334.3 billion yen, and this is the adjusted consolidated profit record high level, and as to market cap, compared to the end of FY 2023, it increased by about 30% to 4.2 trillion yen. The share prices were solid as well. Adjusted PBR is now exceeding 1.0. So we are passing that threshold. Page 6, please. This is the possible achieving the Mid-Term Management Plan targets. Two of them, ROE improvement and EPS growth. still ROE, 2025 fiscal year, about 10%. And by the end of 2026, we are going to achieve this 13% to 15% ROE. We still have a gap to achieve that level, especially for FY2024. We sold the strategically held shares faster than the expectation, so we think we have some headroom to take more risks. The business profitability improvement is one thing, but in organic investment, investment growth there is also important. I have a very strong feeling about that. As to adjusted EPS growth, more than 12% growth. Currently... we are at the pace to achieve plus 14%, Kega 14%. So we are making a very solid progress there. Let's look at page 7. As we looked at the previous page, so other EPS growth, we have two goals, and each business unit and the KPIs and the other important strategies are reflecting those targets. and simple well-being with these two businesses, increased resilience is one thing, but not only that, the gross investment and execution of such investment is going to lead us to 500 billion yen of adjusted consolidated profit and 6 trillion yen of market capital. Such investment is going to increase the probability of achieving these targets. So in organic investment, there are always counterparties, so we cannot talk about pinpointed manner by when we are going to do it, but we will continue to focus on the increasing pipelines. Page 8, this is the last part of my presentation. Two business units and two keywords, increase resilience and connect and be connected. Let me talk about them a little bit. First, as to increase resilience, so financial resilience and non-financial resilience, most of them should be increased. For financial resilience, this time we have this at the Sumpo P&C business unit in place. we are going to make our strong balance sheet even stronger. And we are going to leverage such a strong balance sheet. And SOMPO Japan and SOMPO International are now operating in an integrated manner so that we can optimize the optimal retention and the usage of the reinsurance. We are already doing that. And through such efforts, we'd like to improve profitability. And in Japan, SJR, through SJR, we'd like to improve the business foundation and the profitability improvement. SOMPO P&C, we are going to support the efforts, for example, that we are going to create underwriting culture, or we are going to learn more about the portfolio management. So SOMPO P&C is going to have that benefit. So SOMPO well-being through connect and to be connected through that initiative, the group's center of excellence now be available for the various business lines. Each entity should learn from each other and to support that effort, SOMPO P&C and SOMPO well-being are in place now. As the center of excellence, it's not only about underwriting, but also governance and AI, how to use AI. and diversified cultures and how to manage those cultures and develop the personnel to manage those different cultures. Going forward, SOMPO Beyond the Sea and SOMPO Wellbeing, through these structures, we are going to increase resilience and we are going to realize connect and to be connected.

So from now, I would like to hand over to Jim and also Obasan. So first, regarding Swampo PNC, the CEO, Jim, will be presenting about initiatives for Swampo PNC. So over to you, Jim. Thank you. Thank you.

I am responsible for Sampo PNC, and it's an honor to be here to represent that business and tell you what our plans are. So if you turn to slide 10, you will see, as Okamura-san introduced, that Sampo PNC was initiated as of April 1st, and it's an ambition to create a truly global PNC company born in Japan. As we look at the goals that have been communicated that both from a sample overseas and from sample Japan, they remain unchanged. Our priority is to expand our business outside of Japan with new geographies and new customers. Applicable to all of Sampo P&C is how we manage our cycles. We are going through different insurance cycles and face an uncertainty as respect to the geopolitical climate that we operate in. However, we are committed to navigate and continue to deliver on the promises that we have committed to. We will be resilient. We will focus on underwriting, risk selection, and continue to diversify our portfolio across the geographies and products. We will look for efficiencies in how we operate. We will employ AI to allow our underwriters and our managers to be more efficient and spend more time making decisions. We will look to increase the governance across the organization and put in place consistency at the highest level. We will continue to reduce bureaucracy and challenge ourselves constantly if there is a simpler way to do what we are doing. We are going to promote synergies across the group. We are creating a global culture that respects the local culture in which we operate in. And we're going to leverage our size. We are a top 20 global P&C carrier, and we will utilize that position to leverage our position not just with our customers, our distribution partners, but also with our vendors. If you turn to slide 11, please. This details some of the strategic focus, and I'd like to highlight five. The first is reinsurance. We put in place one reinsurance organization 18 months ago, and I'll talk a little bit about the benefits that we've seen in that. However, it has allowed us to position ourselves with our distribution partners and our reinsurance partners as a global organization and not divide it as two. Vendor relationships. Much of what we do across the globe is the same as what we do in Sampo, Japan, in terms of vendors. However, we were approached as two organizations. So whether that's from an IT perspective, whether it's from a finance and investment perspective, we're looking to leverage those relationships and go to market as one. Underwriting expertise. We've been working very closely between Sampo Japan and Sampo International for the past several years. However, we are going to accelerate that, and we're going to utilize the underwriting communities that we have globally to ensure that we have consistency in appetite, in risk appetite as a group, and we deploy capital in the most efficient way possible. Our employees are our most important asset. we see a tremendous opportunity to provide the next generation the tools to lead this organization in the medium to longer term. We're going to utilize the expertise across the globe and look to develop those future talents, regardless of where they come from or where they work today. and we're streamlining our internal process. As I mentioned earlier, looking to simplify how we approach to eliminate bureaucracy and to do things in the simplest way possible. If you turn to page 12, please. This is the current management board of Sampo P&C. What's important to note is Sampo P&C includes Sampo North America, Sampo UK, Sampo Brazil, Sampo Turkey, Sampo Europe. It is the global part of the organization. However, our focus over the first 18 to 24 months is to bring Sampo Japan and Sampo overseas closer together. And as you will see through the management board It represents five nationalities and individuals who have worked and lived in over 20 different countries and cultures around the world. So a truly international representation and something that I'm very proud of to be working with. If you move to slide 13, again, this map tells you who we are and where we operate, a top 20 global organization, But when I see this map, it tells me that there is plenty of opportunity to grow. If you look at all of the countries and geographies which we are not in, we are going to continue to focus on where we can attract new customers and service our existing customers across the globe. Move to slide 14, please. This is the lens that we would like to show you when we talk about sample P&C business. We feel that we have a very large global, as mentioned earlier, 29 operation countries, but a very diversified portfolio with the consumer business being dominant here in Japan, but also in countries like Turkey and throughout Southeast Asia. Sampo Re has operated on a global basis for many years, and the commercial business represents 50%. As you can see, we also have a very close split in terms of premium written across the overseas and domestic Japanese portfolios. So we enjoy the diversification, we enjoy the balance, and we continue to focus on that, and this is the lens through which we would like to present to you our business. On slide 15, what you see here is examples of some of the successes we've had on the reinsurance business. We have effective purchasing power with no duplication and alignment of our risk appetite as one organization to make sure that we have the right net and gross retentions across the portfolio reflecting our capital allocation and the return that we seek to achieve. I know that yesterday several of these numbers were presented, and so I'm not going to go into great detail, but I would like to restate that the results have been restated on an IFRS 17 basis. There are a few highlights that I think that we should note. The most obvious for us is that Sampo International historically operated on a calendar year basis, and so these numbers have been restated on an April 1st basis. For full year 24, the results have been restated to reflect the adoption of IFRS 17. And the adjusted profit, as we describe it, eliminates all effects of discounting and includes a risk adjustment to our central reserving estimate. And as you can see on the walk, we expect the combination of our increased revenues to translate into a net insurance result. And so I know there will be many questions with respect to these numbers as the terminology is different than we've presented in the past. The result of all of these movements results in an expectation of a 30% growth year on year. What you've already seen from yesterday, however, is some of the highlights from the overseas business is that we're going to be more dependent and more reliant upon our underwriting results versus the net investment income results. which is reflective of the current marketplace. We feel very confident in this, and I think as we look to the first quarter of 2024 for Sampo International, but the fourth quarter as reflected here, we saw a five-point improvement in our largest operation, which is the United States, and we continue to see the results of years of underwriting developments changes coming through in the numbers. And so we're very optimistic that we will continue to focus on underwriting and not on the investment income as you see it flattens out as reflective of the current marketplace. Inflation is something that we spend a lot of time looking at, not just in terms of the cost of what it is to employ people and operate, whether it's third parties or whether it's claim settlement. And so we need to ensure that we operate with both levers, both on the revenue side to ensure that we're getting revenue and rate increase in excess of the rate of inflation, but also that we're managing our expenses in a diligent manner. And so the expense is the only lever we control 100%. And so that is something, as we look at balancing keeping the operation open, but also expanding the operation into different geographies. And so we've seen an increase in our expense ratio over the last couple of years, which was anticipated. Even in the first quarter, we see ourselves under by approximately $8 million of expenses. but we do manage and measure the investments closely. We indicated from before, organic growth requires investment up front, and we expect that this will plateau in 2027 and will return to our targeted 28 or sub-30 expense ratio in subsequent years. If you turn to page 19... Some of the opportunities in Sampo, Japan, is to continue to remain committed to the business improvement plans that we've put in place. That is our number one priority. We are regaining trust and we're regaining from our stakeholders, most importantly our customers, and a focus on our employees. The profitability is recovering. You will see that in 2024, we benefited from a benign cat season and lower large losses. And so when you normalize those for 2025, it shows a slight decrease. But we see a real focus on improvement, not just on the underwriting of our motor and fire portfolios, but also on our expense focus and becoming more efficient in all of the operations that we have. If you turn to the final slide, which is slide 20, this is the expansion of the business I talked about in terms of investments. It's important to realize that these investments are not simply in new geographies, but also in existing markets. In the United States and the UK, we have opened offices in cities such as Denver, Houston, Miami, in the UK, in Birmingham, in Manchester, which is a focus to attract and gain access to a middle market portfolio that typically doesn't get placed outside of those geographies. And so we need to be physically present. And so those investments have proven to be a higher return or faster return because we have established in those marketplaces. But we've also seen success in the introduction of Sampo into Canada. on a local basis in continental Europe, and then investing in parts of Southeast Asia to expand our commercial presence through the Singapore hub. So with that, that is the conclusion of my presentation for sample P&C, and I look forward to questions at the end.