Tokio Marine Holdings Inc

Thank you for joining us. I am Ishiguro of Global Communications. We will now start the earnings call for Tokyo Marine Holdings overview of second quarter fiscal year 2024 results and full year projections. Group CEO, Mr. Komiya, and Group CFO, Mr. Okada, will give an overview of our results and capital policy for about 15 minutes using the presentation document uploaded to our homepage today, after which we will open for questions. Disclaimer before we begin. The presentation may include forward-looking statements based on future projections of current forecasts, which are subject to risks and uncertainties. Please be aware that actual results may differ materially. Recordings of the earnings call are available on request. Let us now start. Komiya-san, over to you.

Hello, everyone. My name is Komiya, CEO of Tokyo Mine Holdings. I thank you for your participation today and for your extended support towards Tokyo Marine. First of all, I will be explaining about the overview of second quarter earnings and key messages from the management. Please turn to page three. There are three key messages that I'd like to convey to you today. The first is about the underlying performance of our business. Regarding the first half earnings, leaving aside the FX factor which worked in favor of us The underlying performance of underwriting business continues to be strong, mainly in international business, such as North America and Brazil. Regarding sales of business-related equities, it is being done swiftly, as we have divested 606 billion yen in the first half of the year, exceeding the original projection. Second point is revision of full-year projection. As I have explained, underwriting performance continues to be strong. However, situation surrounding CRE loans is tough based on the trend of work from home and interest rate as well as inflation staying high. We will be increasing CECL provisions in the second half of the year in a conservative manner. As a result, excluding sales of business-related equities Actual basis profit projection for fiscal 24 will be reduced by 82 billion yen to be 528 billion yen. At the same time, profit projection including sales of business-related equities, which serves as the source of dividend payment, will be 1 trillion 40 billion yen, up by 40 billion from the original projection due to accelerated sales of business-related equities. Excluding such capital gains and losses or one-off impacts such as CRA loan-related matters and acceleration-deceleration of equity sales, normalized basis profit projection will be the same as the original projection. Third point is regarding shareholder returns. we will have the same policy that shareholder return expansion should be consistent with profit growth. With this policy in mind, regarding dividend payments, which is the basis of shareholder return, because the actual basis adjusted net income projection was revised upward, we are also revising the DPS upward from 159 yen by 3 yen to the 162 yen old DPS. We will continue to be disciplined with capital adjustment. That means incremental capital created will be put to M&A to further enhance ROE and or to risk-taking. If we cannot find such good opportunities, then we will use the capital for share buyback. Our most recently calculated ESR was 147%, which is at a fulfilling level. Today, we are announcing PLB on ID&E Holdings, which is a domestic top-class engineering consultancy firm, by 97.8 billion yen. Other than this, we have multiple potential M&A opportunities in the pipeline, mainly bolt-on acquisitions. We also need to be thinking about their impact on EPS growth. Considering the situation comprehensively, we have decided to increase budget for share buyback from the original 200 billion yen to the 220 billion yen. This will be explained in more detail for our CFO, Mr. Okada, later on. So first, let me explain about the first message, underlying profit trend, in more detail. Please turn to page four. This page is regarding top lines. My comments will be excluding FX sector. For the first half of the year, net premiums written increased year-on-year by 5.7%, driven by rate increases in Japan and international businesses. On the right-hand side, life insurance premiums decreased by 32.9%. due to Block B insurance seeded by Tokyo Marine and Nijido Life Insurance Company in April this year. In both EMC and life businesses, the top-line result is in line with the original projections. Based on the actual performance of the third half of the year, we have updated annual projections, so net premiums written on the left will be at 5.3% year-on-year, and life insurance premiums will be minus 15.9% year-on-year. Next, I will explain about adjusted net income. Please turn to page 5. Group overall adjusted net income as of Q2, as you can see on the right-hand side, it was 771.2 billion yen and excluding sales of equities, It is the number in the parenthesis, which is 359 billion yen. Measuring this as the progress rate against the original projections for the fiscal year, they are as high as 77% and 59% respectively. Such high rate of progress is due to brisk underwriting business in North America and Brazil, as we have mentioned, as well as FX effect, which was in favor to our business. I will be explaining the details more specifically, business by business, on this page. In the blue box, I will explain about the Japan PNC. So number one, excluding the April Shogo hail damage, which was added onto this year's projection at the beginning of the year, we have had a benign nut cap for the first half of the year. And number two, progression of yen appreciation at the end of September made us a reverse foreign currency denominated claim results. These two factors make progress rates look rather high. However, even by excluding these one-off factors, we are still in line with the original projection. We have seen some increase in the loss ratio of OTO, but we already have a plan to respond to this with the rate increase expected in January of next year. Next is international business. International business reporting is based on FX as of end of June and yen depreciation had amplified their profits in yen basis. But looking at it in local currency terms, excluding FX factor, progress rate for the first half of the year is 52%, also in line with the original projection. Insurance underwriting business in major markets such as North America and Brazil is strong and investment income in North America is also solid. On the other hand, So single capital loss on CRE loan was also done in the first half of the year. And including that, we are still in line with the plan. Next, I will explain about the full year projections based on the current situation. Please turn to page six.

Revised the estimated income projections for the full year 2024 on an actual basis is As you see on the right hand side bar graph is 1 trillion 40 billion yen up 40 billion yen versus original projections. Excluding gains from business related equities, adjusted net income will be revised down by 82 billion yen to 528 billion yen. Positive factors include strong better writing in the international business in North America and Brazil. benign NATCAT for Japan P&C, and accelerated sales of business-related equities. Negative factors include conservative CCL provisions related to CRE loans, among others. Details of national view of CRE loans are shown on page 40 and beyond in the slide deck. Since The CCL provisions are based on highly conservative assumptions. On a single-year basis in FY 2024, a large part of the income related to CRE loans will be used up. Yet, from an accumulated return perspective, as well as from the conservative reserve ratio, adding impairment and CCL, we believe to have an advantage over other players. Needless to say, this does not change our view of the overall credit investment of Delfine Group. We will continue to leverage the long-term and predictable capital to enjoy investment returns while controlling risks appropriately. Please turn to page seven. This page shows the four-year projections of adjusted income on a normalized basis taking out one-offs, such as gains and losses on sales, using NatCAD, capital gains and losses, such as CRE loans, and sales of business-related equities. In a sense, this shows our current underlying capabilities, a launchpad, if you will, for fiscal year 2025 profits. We expect flat growth versus original projections. Management will continue to pursue globally diversified, bottom-focused, strong underwriting, and leverage robust capital gains as a driver to achieve top-tier EBS growth with confidence. With EBS growth and well-disciplined capital policy, we strive to further enhance ROE. That will be all from me. Thank you very much for that. Capital policy will be covered by Mr. Okada. This is Okada, CFO. Please turn to page 8 for shareholder return. As I have explained in the past, our shareholder return policy is dividend payment. Increase DPS sustainably in line with profit growth. This is our policy. Adjusted an income on an actual basis For FY24, including gains and sales from business-related equities was, as explained by Mr. Komia, revised up by $40 billion. Our profit growth remains quite strong. Therefore, DPS for fiscal year 2024, in line with profit growth, will be up 3 yen from original plan to 162 yen. DPS growth will be up 32 yen year over year. please turn to page 9 of the slide deck. Regarding capital level adjustment and share buyback as a means to adjust, our stance remains unchanged. In other words, as always, if we have the opportunity to increase corporate value through M&A or risk-taking, such transactions will be executed, while in case there is a lack thereof, share buyback will be executed. Regarding M&A, we announced the POB of a leading Japanese company in the engineering consulting industry, ID&E Holdings, for a total of 97.8 billion yen, as was explained by Mr. Komiyama. This TOB will enable us to make end-to-end value offerings in the area of disaster prevention and mitigation, so the business model is globally one of a kind. ID&E is focused on capital light consulting business, and therefore this is a transaction that contributes to enhancing our corporate value. As for international business, valuation of large M&A remains high and therefore require patience, but there are a number of small and medium sized in the pipeline. While we are working on a growth strategy in Japan and abroad, our ESR is 147% at a solid level. Regarding impact to EBS growth, increase in market cap will also need to be taken into account. We took these factors into account comprehensively and decided to increase share buyback for fiscal year 2024 to 220 billion yen from our original plan of 200 billion yen. More specifically, Since 100 billion yen is already approved and executed, the board approved the execution of 120 billion yen today. We will continue to steadily execute our business strategy to increase both EPS and ROE and live up to the expectations of the capital market. That is all for me. Thank you, Mr. Okada. In the remaining time we have, I would like to take your questions.