Tokio Marine Hldgs Ord

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.

The MC is explaining how to ask a question to the Japanese audience. So now Q&A just begins. The first question now, SMBC NICO, Mr. Meraki, please. This is Meraki speaking. So CRE loans, I have some questions regarding that. That was in fact for this time. And so if you make provisioning, then you said that you will be very conservatively provisioned. But then if you look at the loan-to-value classes for office properties, I want to know the balance for different LTB classes and also the provisioned ratio for different classes according to different levels of LTB. And also as for the timing for provisioning, For U.S. banks and to Aozora Bank, I think you were quite late in making the provision. And it must be because you have some specialized portfolio. But while others are not realizing losses, why are you booking such capital losses? Muraki-san, thank you for the question. From CIO, we have Mr. Nakahara with us, and so our CIO is going to be answering your question. This is Nakahara speaking. I will answer your question on the first point about the office properties, the provision, the rate for offices. For different classes of loan-to-value, you were asking, but we don't disclose such details. I don't have such numbers with me. However, what we have been disclosing this time is on page 41. The capital loss is $0.9 billion and cumulatively is $1.2 billion. More than half of that comes from office type of properties. And as for the balance and also the provision rate for office-owned average, As you can see on page 42, it's 10.4% for the entire portfolio. But if you exclusively look at office only, it's 16.5% of provisioned rate. And within office, there are some sound, well-performing properties as well. And so when we think that there is a potential risk to the principal, we make provisions. And I would say it's less than 40% that are classified under such category. And this is the opposite of the loan-to-value, I would say. This is like the damage being done to the principal. I would say it's about 20% to 50%. And so it's about 25% each for different classes. I hope that answers your question. The last part, so 20% to 50%, I didn't understand what you were referring to. So the impairment ratio or damage ratio, when it's about 20% within office, so within 1.2 billion, some of that comes from the office. And on average, the Damage or impairment is about 40%, but not everything is 40%. If you look at the distribution, there's impairment by 20% out of the entire portfolio, and then 25% for the 30%, 40% impairment, about 35%, and then more than 50% impairment is about 20% of the entire portfolio. So that's the distribution according to the different levels of damage or impairment. Thank you. And as for the timing that you were asking about, as you realized our portfolio versus the portfolio of the peers, other companies is different. Other players, as you can see on page 41, the current property value, when it goes below the principal value, and that has been happening since about last year, At that timing, other companies realize capital loss. And in our case, at that point, by executing business plan and because we expect the value increases still to happen, we do not recognize CECL and that is in accordance with the US GAAP. However, the situation concerning commercial real estate is worsening. And so we wanted to be conservative. And so regardless of the US GAAP, we still wanted to be conservative. And therefore, we are now excluding value-add through business plan execution. And that's the change. Of course, we talked to accountants. This is, some of that is in line with the U.S. GAAP, which we cannot book within 24, and so the portion will be carried over to 25. That concludes my answer to your question. Thank you. Thank you very much.

Thank you for that question. Next question, DOA Sujino-san. First of all, international business. Group companies, four-year projections, the ordinary profit of international group companies. And there is a total for international group companies. And the effective tax rate can be seen from that. And I think that it's increasing. not just for this year, but in this first half of the year, but compared to your previous year, it seems to be an increase. That could be because of U.S. GAMF, but please explain why there is a difference. I have one more question, but I guess I can only ask one at a time. Please ask if you have more questions. So Mr. Komatsu of the Corporate Accounting Department will respond to your question. My name is Komatsu from Tokyo Marine Holdings Corporate Accounting Department. Thank you for the question. If you could go into the appendix. Negative number is quite big, I think, is your question. And in the appendix, net profit attribute to the owners of the parent, the projection minus This is our current projections. And this $23 billion, this is a negative profit from companies that are not shown here, are appearing here. And there's also some rounding of the numbers. There is Turkey Marine and Archimede Life. is consigning loans to a company called TMTDL, which is a consolidated subsidiary. NCCL loan is incurred by this company, and that is included in the companies other than the above. So that shows the difference. I see. So Archie Life is consigning loans to this company in the United States, and Archie Life It's consigned to Delphi, correct, in the United States. And the loan that is held by this subsidiary, is that what you mean? It's not really a consignment. It's an investment that we're making, and it's a subsidiary of the company. And therefore, it is not included in the financial management accounting of Ajin Life. And so this is an increased amount. 17 billion yen or so. And apart from the provisions overseas, there are some provisions that are made in Japan, correct? Yes, that is a fair interpretation. We're understanding. Understood. Thank you very much.

Next question will be from Watanabe-san of Daiwa Securities, please. This is Watanabe of Daiwa. I'm looking at page 43, ID and E, impact of the acquisition of ID and E. And so it says the amount is 9.6 billion yen of net profit. And so to the adjusted net income is in fact about 10 billion yen. And also, what is the synergy that you expect to see with your insurance business? And what will be the impact on ESR with this acquisition? Thank you. And so synergy and also business... The Chief Digital Officer will be answering that part, and for the impact of ESR, Mr. Okada will answer your question. This is Chief Digital Officer. My name is Namatame Watanabe-san. Thank you very much for your question. What we have announced this time, which is the acquisition of ID&E, the POB, to be done. What are the synergies expected? What's your question? Already, as we have been explaining to investors at Tokyo Marine, we want to be responsive to these societal changes, add more value, and provide a larger area of services. Against the natural disasters, we want to contribute in disaster prevention and mitigation, which is something that is mainly being done by TMNS and also other subsidiaries at TDR and TDR have been providing consultation and also disaster prevention consortium core, holds about 120 companies and through the affiliation and collaboration with those companies, we have been working on that area. And as a result of that, we have achieved a lot and there has been progress in the area of collaboration. At the same time, we were also thinking that we also need to be enhancing our capabilities. And equally, if not more, we have to be working on polishing up our capabilities. Within that idea, ID&E, which is an engineering technology, which is directly to strengthening society, can be acquired and will be part of us. And we will be able to offer that to a wider circle synergy. in disaster prevention and mitigation in pre and post areas. We have been wanting to develop solutions, development capabilities, so that will be augmented by the capabilities developed by ID&E. So, as Okada-san explained, against a natural catastrophe, there are four areas that we want to work on, which is the evaluation, risk planning, and insurance, and also the recovery and continuation. And so these are the four value propositions that we will be able to provide to the customers. And so these values to be added is unprecedented or rather rare in the world. And so while we have been doing insurance business, that capability will be augmented in a reciprocal manner with what ID&E holds. Based on that, the value that we provide to customers can be enlarged and enhanced. That is the intent of DTOB. about the financial impact and also impact to ESR. ID&E, what they have in the midterm plan, by 27 June, they want to achieve 12 billion yen of net profits, and we want to achieve that, if not more, within our group. And what will contribute to our earnings is that for the fiscal 24, and they will be part of P&L, And from the first quarter of 25, ID&E's P&L will fully be integrated. As of the end of September, their net assets was about 84 billion yen, and the PBR was 1.17. Goodwill is limited. And this is a consultancy firm, which is a less capital-intensive business. And so to our ESR, impact to ESR is limited. That concludes my answer to your question. I understand very well. Thank you very much. Thank you. Thank you. Next question, Mrs. Sato from J.P.

Morgan. Mrs. Sato from J.P. Morgan. My question is related to Muraki-san's question earlier. We already know provisions have increased. Why was that? I want to, rather than asking the background to that, when you held the briefing session in May, there were concerns raised by the capital market, and yet you talked about the uniqueness of Delphi and claimed that impact is going to be limited. That was asserted at the time of IR explanation. So where did you get wrong? Because the interest rates have remained high? Or property value information that's coming from Delphi, have there been some misunderstandings, misinterpretations of the market? What do you think was the cause of that, if you could give us some color? Thank you for the question. Mr. Nakahara, CIO, will explain. This is Nakahara speaking. Allow me to respond to your question. As you correctly pointed out, if you call this a misinterpretation, you are right. And the key point is that our loans, as you see on page 41, there are sponsors, and these will increase value. And that's the assumption against our investment. That remains unchanged from what we have explained so far. But higher for longer interest rates and inflation is pushing up costs and the sponsors who are contributing to value increase, their cash flow is deteriorating lately compared to this time last year, the situation is completely different. And we're seeing some impact in a delayed manner. And amongst the sponsors, there are sponsors who are facing cash flow problems, who could go bankrupt or not going bankrupt, but seeing issues with continuing business. There are some issues amongst the sponsors and therefore we have been allocating more provisions this time this year. So as you see on page 41, we have been expecting a value add to business plan execution but this time we've decided to exclude that value add to business plan execution and that's how we're showing our current assumptions. I see. Thank you very much.

Next question is going to be from Sakamaki Band of Mizuho Securities. This is Sakamaki of Mizuho. I have the risk associated with international business questions. more so than we expected. The inflation continues. The TRE loan related to capital losses continues. So what additional losses are you expecting? I want you to explain that in more detail. As an answer to Muraki-san's question, whatever you cannot provision, it will be carried over to 25. And so how much are you going to carry over to 25? And for Insurance underwriting, any additional reserving you need to do? Regardless of CRA loans, considering the current US situation in US and also in Europe, if you assess the risk level for your international business, how much of that do you see? Thank you. And so for the underwriting related answers, Nana Salasan from IBDD and also for investments related to Nakahara-san against CIO will be answering your questions. This is Nana Sala from IDDD. Regarding insurance underwriting, social inflation is ongoing. I think that's a big theme. After COVID, the courthouses were closed, but then they reopened. During COVID, social inflation was subdued. However, the courthouses reopened after COVID, especially in the United States. litigation funding exacerbated the situation, so social inflation concerns is heightening, is my understanding. On the other hand, at Philly, mainly, we have been explaining that proactively, we have been reviewing the reserving situation, we have responded swiftly So going forward as well, coming down of the inflation is not really seen. And so we do need to stay tuned to the inflation. The risk selection rate increases will take place as necessary so that we are always adequately reserved. And what we have been working on so far, we will continue to do. And so it's not that we have any new concerns about disciplined underwriting, proactive rate increases will continue to be done to respond to the current situation. From the investment side, as I repeat on page 41 regarding the TRE loans, I'm going to be using this page once again. So TRE loans, as you see here, we have accumulated 1.2 billion yen. of the losses which is expected towards the end of the year. We may not hit that number, but then whatever is lack of that, it will be carried over to next year. And the situation may change going forward. So depending on the situation, perhaps next fiscal year, maybe there will be 20 billion or so to incur next year, but that will be explained as a part of the projections for next fiscal year. For other assets similar to CRE loans, any assets with the losses similar to CRE loans, we do not have such other asset classes with similar magnitude of losses. Thank you.

Thank you for your questions. Numerous Securities, Sataki-san, over to you. I have one question about the U.S. business outlook. For example, provisions for CRE loans. Let's say, for example, there's some upsides to sales of business-related equities. You can use that to clean up the balance sheet. So that could be quite one-time, temporary. But apart from that, for example, SWIFT III, has set aside big reserves for the U.S. business and also for aviation lease outside of courts. There's been private settlement outside of court settlement, and therefore there could be downside risk in insurance underwriting. Taking those into account with regard to outlook in the U.S. business, there's no change, or are you seeing some change in your projections for the U.S. business if you could share with us your views. That's very much appreciated. Thank you for your question. Mr. Namasawa of the International Business Development Department will respond to your question. With regards to reserving, are there any major concerns? We do not have any concerns. But with regards to rate environment, there's something that I can share with you. By breaking down into lines of business, For example, rate up in property line until some time ago, there was a rate increase trend. I do not say that the rates are coming down, but it's more moderate, I would say. In casualty line, depending on the business, but commercial auto, for example, in general liability, impact of social inflation is still being felt, and therefore rates are going up. In the meantime, workers' compensation, B&O, and financial lines, in these times of weakness, the trend is more of a declining rate. High and rising rates are no longer observed. So that is our view of the environment. With regards to reinsurance, 2020 to 2023, market has stabilized in renewals in June and July. Property underlying capacity is solid, and we're seeing rates coming down. In the meantime, there were hurricanes, and therefore, for reinsurance, We're not expecting rate decrease. We're expecting somewhat flat growth in rates for reinsurance going forward. So the rate environment, I would say, has been a favorable wind for us, but there are some changes in the trends that we're seeing. So this is something that we will monitor very closely going forward. Our group companies. rate-up plan is being executed, and therefore our group companies will continue to steadily increase rates, but the market environment is as I just explained. I understood. Thank you. So with regard to CRE loan, the capital loss associated to CRE loan, there is less visibility into the future. That is why you've reflected that into your balance sheet. It's not that you're looking at the negative downsides, but there is less visibility into the future. Yes, you're correct. Yes, very simply put, that is what has led to us setting provisions.

from SBI. Mr. Otsuka, please. My name is Otsuka from SBI Securities. I hope you can hear me. Regarding M&A, ID&E, I want to have more details on this. So with the acquisition of ID&E, the conclusion, I guess it was on May 24th, You talked about the disaster prevention and mitigation, and you said the target market size is 1.5 trillion yen. Is it going to enhance your presence within this market, which you calculated as 1.5 trillion yen? I know I need to do more investigation, but looking at the Documents by D&E, they're not necessarily focusing just on disaster prevention and mitigation. They do other things, including synergy that you're expecting. Can you disclose more details on what you expect to achieve with this company? And so I know that in CORE, the consortium, you have been accumulating know-how. So why did you decide to do the M&A? Namatame-san, we'll answer your question. This is Namatame. Thank you for your question. And so I'd like to explain our intent. So ID&E, with our collaboration, even before CORE, we knew about them. But then through CORE, since the establishment of CORE, they are also the initial founding member of CORE and in the disaster prevention, we have aimed at other targets and we have been developing various menus within CORE. Within that, the separate projects that we have done together, we have achieved a lot and so by doing the disaster prevention initiatives together, we will be able to capture the needs of the customers deeply and also to provide value to be added even more through collaboration on top of that in disaster prevention and mitigation ID&E capability is going to be leveraged even more so that we will be able to respond even better to these societal issues, which is what we are aiming to do as a management. And so we have this overlapping intent by the two companies, and we wanted to deepen our relationship together. We wanted to work on natural disasters and other societal issues, and as we discussed, we have come to announce what we announced today. And therefore, this is an engineering consulting company. But more so than what you might imagine as engineering consulting, they are separate initiatives that we have been doing together. And what they do is actually very close to disaster prevention or almost disaster prevention itself. And they have had many experiences, both domestically and internationally, where they have been active in that area. This company is an engineering consulting business, but on top of that, they have been doing research some urban and spatial development business. This is not simply the use of properties or use of buildings and also designing the construction designs, but in the process of designing, they want to enhance the disaster prevention capability attached to the property or to the city, and they have many experiences doing that. So superficially, if you look at some of the examples, it's not necessarily just the disaster prevention and mitigation. I know that they are active in other areas, as you mentioned, or as you might read from this. But then the philosophy deep inside them is very similar, which is that the natural catastrophes that we will face disaster prevention is going to become even more important, whether it's pre or post. It's going to be embedded into whatever they do, including construction or engineering consultancy. We have confirmed that with them. And by working on this together, our capability in the disaster prevention mitigation area is going to be enhanced very quickly. means the Tokyo Marine Group, Tokyo Marine Holdings status quo, your disaster prevention and mitigation service, not only will it get enhanced, but then ID&E, which is going to be your subsidiary, do you think that ID&E's earnings will also expand by becoming part of Tokyo Marine Holdings? The short answer to your question is yes. you have the right assumptions. So our disaster prevention and mitigation solution provisioning capability is going to be enhanced exponentially. And also on the ID&E side, their 4K has, they have their areas of 4K and they have their main market, but then we will be using our sales platform to be selling their services. And so we will have a better access to a bigger market customer segment. So from both sides, there's more value to be added and to be enjoyed reciprocally. I understood very well. Thank you very much.

Three more people have their hands up. Niwa-san, Majima-san, and Tsuchino-san, second round. So in this order, we would like to entertain your questions. Mr. Niwa from Citi Group. Thank you for giving the opportunity to ask my question. I hope you can hear me. Yes, we can. Business-related equities. Your progress in sales of those equities. So having in three years and zero in six years, I think, was the direction going forward. But after that big announcement was made, some time has passed. Any changes in your plan? And what are the reactions of companies? Are there any other areas where you can further reduce shares? And if you have an optimistic view on a bulk value basis compared to the original plan, you've already made an upward revision of 10%. Is it because of individual companies or... Because the plan is being accelerated, are you going to need six years in order to completely reduce business-related equities? I would like to get some sense on that. Thank you for your question. Mr. Okada will respond to your question. So, as we've announced this time, originally we said 600 billion yen a year will be sold, but that has been raised to 750 billion. It's an upward revision. At the beginning of the year, there were negotiations taking place, and we did not receive an agreement from our customers. But during the year, we have been able to receive approval agreement from our customers, and therefore, we have been able to increase our sales. On a book-friendly basis, progress in sales of business-related equities are on track, I would say. We do think we'll be able to by 2029 and having in two years, this is still our plan and through our negotiations with our customers, if we can accelerate their sales, we plan to do so. From the beginning of the year, we have been having regular dialogues with our customers. But in the meantime, there are still companies that value stable shareholding and therefore end of 2029 is still the goal for us to completely reduce the business-related equities. Thank you very much for your comment.

So I also look at the consultancy front. So I have some knowledge about this company. Right now, this company relies heavily on public spending. And so when they rely so much on public spending, their profits are mainly earned in the third quarter, which is January 3rd. And so I guess it's about 12 billion yen in profits, but that gets incurred in January to March. Other months, they almost have no profit because of the nature of their business. So based on that, when this becomes a consolidated subsidiary, I don't think this pattern will change. And so in your fourth quarter, ID&E, 12 billion yen or so, is going to make a contribution. But in other quarters, they make no contribution. It's expected that that will be the impact on this. I believe they're going to be increasing the earnings volatility for Tokimari Holdings. What do you think about this? From Majima-san, thank you for the question. This is Namatame. And so ID&E in the construction or engineering consulting business, due to the nature of their business, they do a lot of work in the wintertime. I know that. We have the same understanding. Indeed, for this fiscal year, I guess I can agree with you on the point you mentioned, but then over longer term, because of the track record they have for the past 15 years or past 20 years, their profit has been very stable, and they have been expanding their profit throughout their history. So over the longer term, the earnings volatility is not going to get accelerated. They are not going to become a factor to do so on us. And also, compared to the profit profile of insurance underwriting, the fee business on annualized basis, fee business type of profit is very stable because as a result of consulting, they receive a fee. And so I believe the volatility is quite low. That concludes my answer. This is Komia speaking. Let me add something to your question, because we have received quite a few questions on this. ID and aid. in disaster prevention and mitigation. They're doing that for urban and spatial development business last year in November. We have smart mobility business that began in November. And so there's some synergy in that area. And they also have energy business. we have also established a preparation company to do the decarbonization business. And so it will be mainly disaster prevention mitigation, but then their technology and their know-how can be deployed using our platform And it was mainly for public business in their case, but then we want to expand the capability more to the private sector. And also insurance is at the center. We have pre and post businesses together with the technologies they have. We will be able to provide a new and consistent business that we can start. Since a few years back, we have said that we are here to provide solutions to resolve societal issues, and we will be developing this business until it becomes a major pillar of profit for the group. And so for disaster prevention and mitigation, including natural disasters, This is a biggest issue carried by Japan. And in this area, we will be providing, of course, insurance, but in other businesses to sandwich the insurance business with pre and post. So I think it's going to be meaningful, impactful, and a new business that we can develop and we can nurture going forward. That is our idea as of today. That was just some additional comments from the field. Thank you very much. Lastly, but not least, Sujino.

OTO, full year, EI, loss ratio, assumptions, inclusive of NAPCAT. You disclosed data, but taking out NAPCAT, excluding NAPCAT, I don't think you're expecting a big NAPCAT in the second half, so for the first half, projections, and OTO. Has it changed that much in your revision this time around? Is that a fair understanding? Or if you have a number that you can share, please do so. Your peers have raised slightly their projections for loss ratio. It could be because your projections have always been conservative, but what is the reason why you made that decision? Thank you for your question. Yahata will respond to your question from Personalized Underwriting Department. And Yahata from the Personalized Underwriting Department. A normalized loss ratio, I think, was your question. For the second half and for the full year, we have made some little bit of downward revision. But it's not like one point, but zero point. less than 1 percentage point revision. It's minor. So frequency and unit cost. I think was your question. For both frequency and unit cost, if I may make some supplementary comments. As for accident or frequency, FY23, there was impact of people there were increase in car accidents after COVID. And compared to 2023, 2022, 23 was an year where we saw pickup in frequency of accidents. But from the second half of 23, that increase in accidents had somewhat subsided and therefore it has decreased. And as a result, in first half of 2024, compared to the previous year, same time previous year, accident rate has decreased, and this trend is expected to continue through the second half of the year. So in terms of the impact of accident frequency as 4% that we shared in May, 4% reduction, we did not revise that forecast significantly. About unit cost of... accidents, impact from inflation, and also sophistication of the vehicles, and also the repair cost going up, and wage for repair is also going up. So those are pushing up the cost of accidents, unit cost. So in the first half of this year, we're expecting the trend to remain flat, and the CPI announced by the BOK is expecting a slight decrease with an increase in inflation. But for the second half of the year, we have revised up. But again, as we shared in May, 4% increase. This outlook has not changed. And therefore, with regard to frequency and also rise in per policy premiums or severity, we're expecting somewhat of deterioration. Therefore, revised the claim cost. So on a normalizing basis, a slight downward provision. Those are the factors that are factored in. Thank you.

Thank you very much. So that concludes the overview of the second quarter for fiscal 24 results and for your predictions for Tokyo Marine Holdings. If you have any further questions, please do not hesitate to contact us. And thank you for your participation. Once again, this is the end of the telephone call. Thank you.