Tokio Marine Holdings Inc

Good evening. Thank you for joining us today. I am Ishiguro of Global Communications. We will now start the conference call for the FY2024 results and FY2025 projections as announced today. We will start with a presentation from our CEO, Mr. Komiya, followed by CFO, Mr. Okada, by referring to the presentation material posted on our homepage today, focusing on our earnings, and capital policy. The presentation will be for about 15 minutes, after which we would like to take your questions. A disclaimer before we begin. The presentation may include business projections and forecasts based on information and assumptions available to us today and is subject to risks and uncertainties. Please be reminded that actual results may differ from projections. Please note that we have reporting service for this conference call. Let me start. Over to you, Mr. Komiya.

Good evening, everyone. My name is Komiya. Thank you very much for taking time out of your busy schedule to join us today. I would also like to thank you for your continued support towards Tokyo Marine. First of all, I would like to begin by explaining the content of the financial results for fiscal 24 and the message from the management based on these results. Please turn to page 3 of the document. There are three main points I would like to convey to you today. The first point is about fiscal 2024 results. Our management places more emphasis on adjusted net income including gain on sales of business-related equities, i.e., core profit of insurance business, and this figure on actual basis was ¥608.9 billion. This is an increase by ¥27.9 billion over the four-year forecast announced most recently in February. This is due to the appreciation of the yen against the foreign currencies used by Japan PNC in its financial results as of the end of March 25, which reduced the burden of foreign currency-denominated reserves for outstanding claims. Normalized basis adjusted net income, excluding one-off effect, was 679.0 billion yen, in line with the February forecast. This would translate to plus 14% year-on-year growth which is quite high. This was due to the strong performance of major international businesses, as well as the depreciation of the yen against exchange rate used by international business in their financial statements, which is the exchange rate as of the end of December 24. Another reason was due to the rate increase in Japan PNC and a decrease of large losses. Sales of business-related equities amounted to 922 billion yen, exceeding the February forecast by 10 billion yen and 1.5 times higher compared to the initial forecast. Source of dividend will come from actual adjusted net income, including gains on sales of business-related equities, which was 1,215,000,000 yen, an increase of 35 billion yen from the February forecast and 1.7 times that of the previous year. The second point is the forecast for fiscal 25, which is 700 billion yen excluding gains on sales of business-related equities. This would be 3% growth compared to last year's normalized adjusted net income. This growth will be driven by continued strong performance at the major international businesses and also rate increase in Japan PNC. The reported growth rate will be calculated based on the FX assumption we set at the beginning of the year for fiscal year business plan, where international business will be exposed to some impact of FX rate. This assumed rate taken at the end of March 25 is showing yen appreciation compared to the actual rate at the end of last year. Therefore, looking at the actual performance excluding FX factor, I think it is fair to say that the overall growth rate will be positive 7% growth and the underlying trend is favorable. The plan for sales of business-related equities is currently assumed to be 600 billion yen, the same as the initial plan for fiscal 24. And adjusted net income after completion of sales is expected to be 1 trillion 100 billion yen. Adjusted net income, including gain on sales of business-related equities, will be slightly affected by the pace of sales over the next five years until we reach business-related equity holding of zero. We believe that this is not directly related to corporate value. and we will continue to achieve world-class growth with our core insurance business profit. The third point is about shareholder return. We continue to believe that the profit growth of our business and expansion of shareholder return should be consistent. There is no change to that policy. In this context, the DPS for fiscal year 24 will be 172 yen, an increase of 10 yen over the forecast at mid-year based on the further upward revision of profit. This would result in DPS growth of 40%. Furthermore, DPS for fiscal 25 will increase by 38 yen to 210 yen in line with the profit growth I have explained. This will result in DPS growth of 22%. In addition, for capital stock, we will continue to implement a disciplined capital policy. Since last year, we have announced our intention to spend 1% to 2% of EPS growth for share repurchase. Current level of ESR is at an ample level of 149%. We also have several investment opportunities in the pipeline, mainly for bolt-on M&As. Taking all of these factors into consideration, we plan to repurchase 220 billion yen over our own shares in fiscal 25 for now. We will continue to implement share buyback flexibly throughout the year. But today, as its first step, 110 billion yen of share we purchased was approved. Mr. Okada, our CFO, will explain more on the capital policy later. Now, I'd like to explain these aforementioned points in a little more detail. Please Go to page four. First is top line. Fiscal 2024 results. As you can see on the left, net insurance premiums increased by 10% year on year, as announced in February. And excluding foreign exchange effect, it was an increase by 6%. For life insurance premiums on the right, Due to the additional implementation of block reinsurance by Unseen Life in March, life insurance premium decreased by 44% from the February announcement. In this context, our four-year forecast for fiscal 25 is for a steady increase in net premiums within by 3% year-on-year and by excluding foreign exchange factor, an increase by 5% year-on-year, driven by rate increases and underwriting expansion. Life insurance premium is expected to be 45% year-on-year growth due to the impact of the block-seeded reinsurance program implemented by iSEEN Life in fiscal 24 and also in April of 25. Next is the adjusted net income. The actual profit for fiscal 24 is shown on page five. As I explained earlier, we believe that analyzing and evaluating the normalized basis profit is more important in terms of measuring the strength of our business. So, please proceed on to page six. Normalized adjusted net income excluding gains on sales or business-related equities for fiscal 24 is 679 billion yen, an increase by 82.5 billion yen year-on-year and 14% growth compared to the previous year. We would like to evaluate this for different businesses. First, in Japan PNC business, there were some profits declining factors such as higher auto loss costs, higher natural disaster budgets, as well as prior year reserve development for liability insurance in North America. However, we also had other factors such as rate increase in automobile and fire, a decline in large losses, and reaction from an increase in foreign currency denominated reserve for our outstanding claims in connection with the yen depreciation in fiscal year 23. Japan P&C business unit profit increased by 28.8 billion yen from last year.

In international business, profit decrease in Asian life due to drop in interest rates and decrease in prior year reserve takedowns partly offset strong insurance underwriting and income revenues, especially in key entities, and profit boosted by yen depreciation resulting in an increase in profits of 29.7 billion yen compared to the previous year. Our full-year earnings basically naturally hedge against the impact of exchange rates. In other words, yen-denominated profits in the international business and Japan's BNC, foreign currency-denominated loss reserves, cancel each other out. But it is also true that the exchange rates used for financial results differ depending on the business. In light of this, exchange rate fluctuations in FY24 were quite volatile, and the exchange rates used for financial clothing of each business were all favorable to us. And as a result, the management's honest assessment of FY24 profits is that there was a wind-aided element to it, and all in all, we believe that a plus 5% growth is a reasonable view. We also factored in a large capital loss on CRE loans in November of last year. To be honest, we were not exactly familiar with the CECL practice, and from our lessons learned, we have revised our average yearly expected capital loss from minus $265 million, it was revised to minus $440 million. Please turn to page 7 for FY25 projections. Adjusted net income for FY25 excluding capital gains from sale of business-related equities is projected to be 700 billion yen, and our planned sales amount of business-related equities is 600 billion yen in adjusted net income, including gain from sales of business-related equities, projected at 1.1 trillion yen, as I explained at the beginning. Let's look at the breakdown by business. Japan PNC will have a 7% growth, despite factors such as decrease in profits due to a decrease in dividends from sale of business-related equities and an increase in IT costs. There are positive factors such as absence of prior year loss reserve development for liability insurance in North America and the rate increases for OTO. International business appears flat growth year over year compared to the previous year due to the strong yen, but excluding exchange rate impact, It is plus 5% growth due to steady growth in key entities and a rebound in the Asian life insurance year over year. That is all for me. As seen in the recent tariff policy, the global economy is becoming ever more uncertain and the business and management environment is by no means easy. Yet, our company, Tokyo Marine, remains resilient. We will continue to achieve world-class EPS growth with a high degree of certainty, driven by globally diversified, low volatility, robust underwriting, and the strong income profits that come from this. By balancing EPS growth and disciplined capital policy, we will further increase our OE. We will manage and run the business with a strong will. Your continued support is very much appreciated. Thank you very much, Mr. Komiya. Let me turn to Mr. Okada for capital policy. This is Okada, CFO. Let me cover shareholder returns and capital policy on page 8. Once again, as we have stated before, the basis of our shareholder return is dividends, and our policy is to realize DPS growth consistent with profit growth. the actual adjusted net income for FY24, including the gains on sales of business-related equities, which constitutes the source of dividend, as explained by Mr. Komia earlier, were revised up. DPS for FY24 has also been revised up by 10 yen from the midterm forecast to 172 yen, with a DPS growth of 40% year-over-year. For FY25, we expect a moving average growth in the source of dividend on the back of continued favorable profit levels. So we will increase DPS by 38 yen to 210 yen and the DPS growth to 22%. Next, please turn to page nine. Our thinking towards capital-level adjustment and share buybacks as a means to achieve this remains unchanged. In other words, capital generated through organic growth and portfolio review will first be used for M&A and risk-taking that will contribute to improving our ROE. And if such opportunities do not arise, we will carry out share buybacks as we have no intention of unnecessarily accumulating capitals. Also, since last year, we have announced that we will achieve 1% to 2% of EPS growth through share buybacks. In light of this, we have taken into consideration the effect on EPS growth. In other words, the ratio against our current market capital of 11 trillion yen, the ESR level, our current pipeline of bolt-on M&As, and the risk-taking opportunities due to environmental changes. and have decided to set the amount of share buybacks for fiscal 2025 at 220 billion yen for the year at this point in time. And today, buyback of 110 billion yen at the first step was approved. And finally, regarding the sales of business-related equities, please turn to page 10. In FY24, we ended up with a sale of 922 billion yen, far exceeding our initial plan of 600 billion yen today. as we reached agreement to sell from various customers' counterparts. We plan to continue accelerating sales in order to achieve the milestone of halving the balance at the end of FY23 by the end of FY26, as set out in the current midterm plan, and achieving zero by the end of FY29. Therefore, for F-125, although the overall market, for example, topics, has fallen by about 4% compared to the beginning of last year, we have set a sales target of $600 billion, the same amount as last year, as our initial plan. We will continue to execute our business strategy to raise both EPS and ROE and thereby respond to the expectations of the capital market, such as yourselves. That is all for me. Thank you. Mr. Okada? In the remaining time that we have, we would like to take your questions. Explanation is currently being given on how to ask questions in Japanese. Let us start the Q&A session. Any questions?