Sompo Holdings Inc U/Adr

Hello, this is Tachiri, Group CFO of Sonpo Holdings. Thank you all for joining us today. I'll be walking you through what we have disclosed today, full year results for FY2025, full year forecast for FY2026, and the shareholder return. I will just give you main points. I will take questions after the explanation. So without further ado, please turn to page 3. It says Executive Summary. This page captures the highlights of today's presentation. Starting with FY2025, we delivered growth across all business segments. Profitability gains at sample B and C, in particular, were the driver of the group profit, lifting adjusted consolidated profit to 535.2 billion yen, up 211.8 billion year-on-year, and a new all-time high. Notably, this means we have achieved our FY2030 target of 500 billion yen well ahead of schedule. Looking ahead to FY2026, our adjusted consolidated profit on the NATCAT and other normalized basis is projected to grow by further 62.4 billion, again reaching a record high. The key growth drivers are continued profitability improvements in domestic BNC, along with meaningful earnings contributions from consolidation of Aspen in our overseas insurance business. Our shareholder returns remain committed to the policy outlined in our medium-term plan. Total returns for FY2025 dividends plus share buybacks will come to 281.6 billion yen. For FY2026, we are raising the dividend per share by 33% to 200 yen, which would mark our 13th consecutive year of dividend increases. The pages that follow will cover each of these points in more detail. Please turn to page 4. For FY 2025, as I said earlier, adjusted consolidated profit came in at $535.2 billion, up $211.8 billion year-on-year, and a new record high. In domestic P&C business, profit rose by 95.9 billion yen, while decrease in NatCat provided some tailwind. The main contributors were a plus 70 billion yen in improved base profitability of fire and casualty, and a 15 billion yen increase in investment income driven by stronger fund-related returns.

Adjusted consolidated profit of overseas insurance business increased by 105.5 billion yen, while favorable NatCat situation contributed. Base profit other than NatCat also improved, for example, through better loss ratio contributing 25 billion yen, and increased interest and dividend income due to larger AUM bringing 27 billion yen positive impact. Sampo Wellbeing increased its adjusted consolidated profit by 7.9 billion yen with decreased claims payment and growing nursing care business. Page five shows drivers of change for FI2026 full year forecast. In FI2025, as I mentioned earlier, There was one off-tail wind coming from decreased nutcat losses contributing 97.7 billion yen. FY2026 adjusted consolidated profit is expected to be 500 billion yen, up 62.4 billion yen compared to FY 2025 normalized basis, excluding the impact of this tailwind. For domestic P&C business, further improvement in underlying profitability of auto insurance and fire insurance will drive profit increase. Profit growth of overseas business will be driven by not only SOMPO International's organic growth, but also full contribution of earnings by Aspen, which was consolidated in February, is the acquisition completed. Lastly, on page six, I explain about shareholder return for FY 2025. In accordance with the shareholder return policy in the midterm plan, the total return amount has been set at 281.6 billion yen. Diblin per share is 75 yen for the second half amounting to 150 yen for the full year. As to share buyback, we have decided the buyback shares was 69 billion yen for the second half making the total annual amount 146 billion yen. For FY2026, dividend per share is to be increased markedly to 200 yen or plus 33% year-on-year, outpacing the annual 19% EPS growth in the current mid-term plan. Dividend is expected to increase for 13 consecutive years. FY2026 payout ratio is expected to be 39%, but on medium term, we will aim at increasing it to 50% level. With respect to medium-term management strategy other than shareholder return, the group CEO will present it at the IELTS meeting from 3 o'clock on May the 22nd. This is the end of my presentation. Thank you for listening. Thank you, Tajiri-san.

So with that, our first question comes from Mr. Muraki of SMBC Niko Securities. My name is Muraki from SMBC and Equal Securities. I have two questions. Please clarify how you calculate and define ROE. In reexamining ROE denominator, there's a new supplementary remarks this time. When you consider a 13% in ROE target, I'm looking at page 17, bottom footnote four. Can you tell me about this section? Also, as you use ROV as your management KPI going forward, will you continue to use this adjustment or do you plan to introduce new definitions? So what is your view on this? So this is my first question. Along with this question is about share buybacks. Your ESR is beginning to surpass your target quite significantly. So your reason for holding back on buybacks is because you have some visibility into investment or changes in circumstances. Can you enlighten us? Thank you, Mr. Muraki. Let me answer the first question from me. First of all, with regards to the ROE for FY2026, about some adjustments made on the denominator when we calculated it, an adjustment that we made. You're right. As mentioned on page 17, asterisk 4, ROE is adjusted to reflect the financial market assumptions. The main adjustments include fund-related, FETPL, where the unrealized gains have unexpectedly increased and inflated the denominator. Here, we estimate that plus one percentage point or more impact. On a net asset basis, there is approximately 400 billion yen increase. So that's the situation. In addition, if we accelerate the sales of strategic shareholding set out in the mid-plan, so if that impact is included, or if we sell off the large shares we own today, that would also have an impact. So altogether, we estimate that there would be an increase of 800 billion yen in net assets. So that's our calculation. And if we adjusted the impact, we estimate that ROE for FY2026 would be 13.1% as stated at the bottom of page 17. So then the question is, are we going to continue to use this definition at this point in time? We have not decided on any policy going forward. but we will continue to make sure that the investors understand our true capability from both denominator and numerator, and then set our policy in the future. Then let me answer the second question. When we basically maintain a total shareholder return ratio of 50%, we want to increase the percentage of dividend in the midterm. And so to demonstrate that, we have raised the dividend payout ratio to 39%, and DPS was 33% higher year-on-year. The rest of the 50% would be used for buybacks. and the 50% of the sales of strategic shareholdings will also be used for buybacks as well. Meanwhile, In terms of midterm and long-term view, we believe we have room to grow organically as well as also in terms of profitability, we want to build capability to achieve 13% in a stable manner. So we will maintain 50% in total shareholder return and generate a numerator that allows us to stably generate 13%. At the same time, we want to start preparing now to do a large M&A, especially at a time that the market is softening. We're beginning to see companies on sale far more than before. At least I have that feeling. I've been doing M&A, and I've been hearing about deals officially and unofficially, different opportunities, and really no specific deals at this point in time, and that is why we're holding back on buybacks. That's not the case. But we could see it happening any time. We're beginning to see that sort of situation happening. So that is why we want to be prepared for large M&A, want to secure ample capital and funds. So that's the basic thinking. I understood well. Thank you very much. Mr. Muraki, thank you.