Tokio Marine Holdings Inc

TSE:8766

Earnings Call Transcript 2022-Q2

[Taizou Ishiguro, executive]

Thank you, everyone, for gathering here today. My name is Ishiguro of IR Group. From now on, I would like to start the telephone conference regarding the Fiscal 2021 Second Quarter Results and Full Year Projections of Tokio Marine Holdings. This conference will be done in 2 parts as we have preannounced. The first part will be the management session where our Group CEO, Mr. Komiya; and Group CFO, Mr. Yuasa, will talk about projections, how they view the current business environment and capital policy using the presentation material posted on our website today. That will take about 10 minutes. Then after that, we will take high-level questions from the participants.

After the first part, in the second part, we will take more specific questions regarding each business, people in charge of each business will be answering those more detailed questions. Time allocation in between these 2 parts is challenging because we are doing this style for the first time. We are thinking of deciding this hour to be half and half, but we will be flexible depending on the situation. If we run out of time in Part 2, IR Group will be responsible in getting back to you with additional questions if we do not have adequate time in Part 2. Before we begin, we need to give you some word of disclaimer. In this conference, we will refer to future projections based on current estimation. Please note that it may contain risks and uncertainties. Please be aware that actual results may differ from the projections we shared with you. There is a recording service in this conference.

Now let's begin Part 1 of the conference. First, our Group CEO, Mr. Komiya, will present to you for about 7 minutes. Komiya sir, please start.

[Satoru Komiya, executive]

Hello, everyone. Good evening. My name is Komiya. Thank you very much for joining this conference call despite your busy schedule. I would like to also extend my appreciation to all of you for always extending your support to Tokio Marine. At the start of the management session, I would like to explain the financial results for the second quarter. And based on that, we'd also like to give you some messages from the management.

Please turn to Page 3 of the material. We have summarized 3 key messages we wanted to convey to you today. Up until now, Tokio Marine has tried to diversify risk globally and taking high growth momentum from the international business. That is the basic strategy we had and we executed on that strategy. At the same time, as a global insurance company, we have embellished our capability to manage the group by gathering with them and passion of the members from all of the group, including domestic and international companies. I would like to report to you that recently we are seeing the outcome of this kind of an effort in full scale. I will be more specific, starting with the first point.

Adjusted net income at the end of the second quarter stood at JPY 318.1 billion year-on-year 170%. Progress rate against the original projections is 75%, which is a high level compared to the average progress rate from the past 5 years, in one word, I can say that this is a very good progress.

Second point is that based the recent around businesses, we are revising the full year adjusted net income guidance upwards by JPY 66 billion, and we'll refer to guidance to be JPY 490 billion. Regarding our future targets of adjusted net income being JPY 500 billion, adjusted ROE by around 12%. We have been explaining to you that within the course of the current midterm management plan, we started from this fiscal year, which is a 3-year run, those targets will come to a reachable range. However, forecast for fiscal 2023 is expected to have some upside. And by 2023, I believe we will well overshoot the targeted adjusted net income of JPY 500 billion. We believe such strong profit growth and shareholder return should come hand in hand. So coming to raise the payout ratio to be 50% should be accelerated to 2023. It will happen in 2023.

Based on this decision, payout ratio of fiscal 2021 this year will be raised to 47% from the original projection of 43%. DPS will be raised by JPY 30 compared to the original projection and will increase year-on-year by JPY 45. DPS will become JPY 245 per share. During the current midterm plan, we will use means of profit growth and raise in payout ratio, we have to drive us to enhance shareholder return.

So now I will touch upon these points in more detail. Please go to Page 4. Top line as of the end of the second quarter as well, net premiums written increased by 4.5%. And Life Insurance premium increased by year-on-year 0.6%. They both outpaced the original projections at the beginning of the year. So by reflecting these favorable results, we will make an upward revision to this year's full year projection.

Specifically, projection for net premiums written for the full year is revised to be plus JPY 3.8 billion year-on-year and also revising the life premium upwards, as you can see on the page.

Now I would like to talk about adjusted net income, please turn to Page 5. I have already touched on consolidated result of adjusted net income for the first half of the year was JPY 318.1 billion, and progress rate versus the original projection is 75%, which is very high compared to the average progress rate from the 5 years.

Now let's look at the components. In our domestic business, Tokio Marine Fire strong top line. At the same time incurred loss is lower than expected because of COVID-19 impact and decline of natural catastrophes. TMNF's average rate of progress for the past 5 years is 29.8%, where at this time is 94.8%. Overseas, there was some impact of Texas winter storm, but we had a strong performance both in insurance underwriting and investments, which offset the impact of winter storm and well above the original projection. Major North American businesses at the end of the second quarter was better than the original plan by JPY 25 billion.

Now let's talk about the upward revision to the full year projection. Please turn to Page 6.

Full year forecast was up by JPY 66 billion to [JPY 409 billion] (sic) [JPY 490 billion] as I explained earlier. Let me take you through the breakdown by business unit profits. In blue, our domestic TMNF business is expecting to increase in underwriting profit that was revised by JPY 37 billion.

Natural catastrophes [budget] for the second half is, this may be conservative, by JPY 3 billion before tax.

Next is international business in orange. Despite the impact of natural catastrophes Texas winter storm, Hurricane Ida in the second half, underwriting profits and investment income were both strong. Therefore, projections were revised up by JPY 35 billion. As described, we are only seeing our strategy planned and executed bear fruit on a full scale.

In light of our current performance, or should I say our underlying capabilities on a normalized basis, adjusted net income in fiscal year 2023 is expected to increase further to far surpass JPY 500 billion. As management, we will brace ourselves to increase group profit and ROE this fiscal year and beyond, which I plan to share with you next week at the IR briefing. That is all for me.

[Taizou Ishiguro, executive]

Komiya-san, thank you very much. Now let me ask Yuasa san to cover capital policy. Mr. Yuasa, CFO.

[Takayuki Yuasa, executive]

So let me take you through our shareholder return policy. Please turn to Page 7. Primary means of shareholder return is dividends for the company, which will be sustainably increased along with profit growth. The company has so far said that once the company reaches its goal of above JPY 500 billion in adjusted net income and approximately 12% in adjusted ROE, payout ratio shall be increased to levels on par with its global peers. The timing, however, referred to as when the company is able to deliver the target in a stable manner and was not clearly set out. As mentioned by Mr. Komiya earlier, the company has been executing its management and business strategies to realize our goals and as shown in the upward revision of the fiscal year 2021 profit, our underlying capabilities are steadily improving.

In May this year, we asserted that adjusted net income for fiscal year 2023 is to reach above JPY 500 billion. Unless anything unexpected happens, we should be able to achieve it, and we are confident to be able to remain above JPY 500 billion beyond fiscal year 2023. Based on this understanding, the timing of realizing payout ratio of 50% is now referred to as when adjusted net income is expected to exceed JPY 500 billion or have been forward to in fiscal year 2023 under the current plan for the sake of better transparency.

As we brought the timing forward, payout rate in fiscal year 2021 is revised up from the initial 43% to 47%. DPS up by JPY 30 from the original forecast and up by JPY 45 year-over-year to JPY 245. The company is confident of profit growth beyond the fiscal year 2023. After raising [ratio] to 50% to we intend to raise the DPS on the basis of profit growth and not to decrease dividend [indiscernible].

Next is capital level adjustment. This year, we said, in fiscal year 2021, JPY 100 billion will be spent flexibly, including bolt-on M&As. Share buyback of JPY 30 billion in June was followed by another JPY 30 billion share buyback in September. JPY 60 billion in share buyback has been executed so far this year. As for the remaining balance of JPY 40 billion this fiscal year, we are committed to execute we promised. The timing of announcement will be decided in a flexible manner. At this point in time, we do not anticipate both of that will be deducted on the remaining balance of JPY 40 billion. So far, the company has taken a taken a mid- to long-term perspective and using generated capital into business units to realize growth and returning excess capital to shareholders in a disciplined manner. We will continue with our capital policy to realize profit growth and increase our ROE.

From this perspective, the new method introduced the fiscal year 2021 was meant as a show of intent of the company that kept there is a question of that we do it or not will be implemented. However, it turned out to draw many feedbacks from the equity market. Therefore, in fiscal year '22, we have considered to revise it in a way that can be supported by the market. The company will execute its business strategy in the same manner to fully achieve some goal and to respond to the expectations of the capital market. Your continued support and understanding is very much appreciated. This is all for me.:

[Taizou Ishiguro, executive]

Yuasa-san, thank you very much for that. We have come to the end of the presentation for Part 1. We would like to spend the following time to take your questions. Call asking questions is explained in Japanese.

First SMBC Nikko, Mr. Muraki, please ask your questions.

[Masao Muraki, analyst]

Thank you for the opportunity, CEO and also Mr. CFO, I was listening to them. And I was listening to the Greenburg's statement [indiscernible] before. And I think it overlaps with his comments. I have a question on Page 6. And so JPY 490 billion, which is the projections for the adjusted net income for this fiscal year. I know that there are a lot of one-off items such as reduction in traffic, the capital gain from asset management. So you don't have to refer to the details. But the underlying earnings capability, how much do you think is coming from your true underlying earnings power, excluding the one-off? And you said that you will be exceeding JPY 500 billion. What are the drivers that you will have next year that would make you reach JPY 500 billion and beyond?

[Satoru Komiya, executive]

This is Komiya speaking. Let me answer your question. So JPY 490 billion, how we view that? As you said, this includes one-off factors such as investment income in North America. I do not have the exact numbers, but there must be a drop in loss ratio coming from COVID-19, et cetera. And so if we exclude those one-off items, then JPY 475 million, JPY 470 million would be the underlying figure. And the enhancement of our true earnings capability, we need to do more, for example, rig increase in North America at TM Kiln, the turnaround of kiln. And also with the domestic total insurance, we also need to be improving the profitability. We have made progress with these. And this improvement is likely to continue going forward. We have made many challenges social inflation, COVID, et cetera. We have completed all those challenges. And we have enhanced our underwriting capability. We have also improved our underwriting organization, their capabilities as well as their execution capability to improve underwriting income, et cetera. So that is also coming from a better synergy within the Toko Marine group.

For 2023, the JPY 500 billion for us to exceed the JPY 400 billion, what are the key drivers towards that? Domestic business, improvement of profitability of higher insurance and also expansion of the specialty insurance in the international in North America, centering around North America, we're expecting an increase in underwriting income. The growth of [indiscernible]. And so together with the expansion of the business, there should be a bigger AUM, and therefore, bigger investment in company [indiscernible]. In North America, the major 5 companies, they will be doing bolt-on acquisitions, and we also have joint venture [indiscernible] initiatives in the emerging markets. And so for those details, I will refer more to them in the IR meeting next week. I hope to refer to them more next week. That concludes my answer.

[Masao Muraki, analyst]

I just wanted to confirm 1 point. So in North America, including social inflation, I know you had some challenges. Those challenges, do we just say that they are already past, we have overcome them and they are the past history?

[Satoru Komiya, executive]

This is Komiya speaking again. So several companies suffered with social inflation, especially PHLY suffered with social inflation. So loss cost, we have been able to increase the rate over the market level. And also for the bad result policies, we have been declining them.

And there has been a better underwriting discipline in reviewing those policies. And so PHLY has been very persistent in doing that. And as a result, in 2019 was the hardest year and pertaining 2020 and '21 in the first half of this year, we are seeing the fruits of their labor are reflected in the numbers. Of course, social inflation, there is a possibility that it's going to worsen again. And also, we are reducing the high-level limit and other measures on the underwriting side. While we are in the COVID-19 situation, there are some courts that are closed, but they will be open to each policy they had underwrite, they have dealt with those policies one by one.

And the new CEO, Mr. John Bram, it's been, I guess, about a year since he was appointed. The management team at the end of October, I visited them actually. And I met the CFO, a new person was added. And so PHLY was always known for having good top line. So we plan to continue to have them grow into the future.

[Taizou Ishiguro, executive]

Mr. Watanabe from Daiwa Securities.

[Kazuki Watanabe, analyst]

This is Watanabe from Daiwa Securities. I have a question on capital policy. Is it a one-time dividend or a dividend payout that has been refined the stats, this I think is quite bold. This onetime dividend, how will that be positioned going forward? And Yuasa-san, you said that the scheme will be revised in fiscal 2022. What kind of framework do you have in mind? If you could please share your idea with us, please?

[Takayuki Yuasa, executive]

This is Yuasa speaking. Let me take your question. As for onetime dividend. The reason why introduced it was based on the comments that feedback we received from the stakeholders and shareholders that some actually preferred onetime dividend. And it was, I think, to a certain extent, appreciated by our shareholders.

At the beginning of the year forecast decrease in dividend seems to be emerging. I think it appears quite difficult to understand at the beginning of the year. And so based on that, going forward, we decided not to do any long-term dividend payout and instead, conduct ordinary dividend. And as I said, 2023, fiscal year 2023 payout ratio to 50%, we are more confident in achieving that and that sort of led to our decision.

And when we make onetime dividend, the JPY 100 billion in budget is going to be used. We took that into account and decided that we should not do it this time around. That is the basis of our decision.

And the second point, when it comes to introducing more easier to understand the new method, I apologize, but this is something that we intend to deliberate by May next year. But this JPY 100 billion of budget that we introduced this year. We've received no feedback and had exchanges with the shareholders with our investors, and we will take those ideas into account to come up with a better to -- easier-to-understand approach.

[Satoru Komiya, executive]

Basically, I think our CFO said it well, but with the JPY 100 billion in budget, there are a lot of ideas on that. And our thinking was well reflected in Mr. Yuasa's presentation at the outset, but we received a lot of input and feedback, the JPY 100 billion this the guidance or framework, we will not do that in fiscal 2022. With regards to our new math, we want to adopt something that is easier to understand.

[Operator]

Next, from Citigroup, we have Mr. Niwa.

[Koichi Niwa, analyst]

My name is Niwa from Citi. I'm looking on Page 7, line #1. And so I want to know more about the certainty of profit growth because it's been 6 months since the year began in May. You said that JPY 500 billion will become a reachable range, but then it's only been 6 months. Then what changed in those 6 months? Is it the internal organic growth? Is it the M&A possibility? Or is it the improvement of the macro economy? Or was JPY 500 billion [indiscernible]. And so what happened in those 6 months as to for you to say that today?

[Satoru Komiya, executive]

This is Komiya speaking. About fiscal 2021, we looked at the COVID-19 impact in 2020, how much of that is going to progress next this year, et cetera, we have some extraordinary factors. But as I said in the very beginning, we have worked dedicatedly on risk diversification and other efforts. And so we have taken that strategy, we have been executing on that strategy. And through those efforts; looking at the 2017, '18, '19, '20, we had much natural catastrophes. We were hit with COVID-19. But then looking at 2021, those factors are relatively benign. And so it's easier for you to see the underlying earnings capability without those factors this year. And although we had much challenges, as I mentioned earlier, the underwriting capability, the earnings generation power, et cetera, the underlying capability has been enhanced, thanks to all of the initiatives that we have taken.

And as for group synergy, sometimes I show you some quantitative results, but there are also some qualitative aspects of synergy. For example, information exchange, exchange of comments, we encourage each other. So there is much more coherence in the group. So management-wise and also emotionally, we have become more a resilient by the group.

Talking about each of these factors. And as I said in the beginning, there are some issues related to also improvement to profitability with fire. These are the things that we have worked on, and we are seeing a good result out of those efforts. And also outside of Japan, the rate increase effort, we have materialized results of such efforts as well. And so there are some specific factors. But what I have just answered you now is reflected in our underlying earnings capability. And that is what we are seeing now on the surface, although it's been 6 months since the current midterm plan began. That is my understanding of where we are. Of course, we will continue to put an equivalent amount of effort into those efforts to those initiatives.

[Koichi Niwa, analyst]

I don't mean to be so meticulous, but you're already making the thing in the statement after 6 months, would you be further upside expected in the future?

[Satoru Komiya, executive]

Well, the upside the direction that we're going upwards, of course, we have some expectations for going upwards and seeing more upside. However, the era we live in, we have natural catastrophes, we have global economic situations, et cetera. So we need to be vigilant, and we need to be alert as ever in living through such era. But if everything that, that we are working on materializes, then that's what I would like to see. And we are doing now best in order to see a favorable result.

[Operator]

Next question from Mizuho Securities, Mr. Sato.

[Koki Sato, analyst]

This is Sato from Mizuho Securities. Ordinary dividend level has been raised and I might be [indiscernible] asking this question. But when it comes to additional return to shareholders. Next fiscal year, you said that you're going to revise the system. But if profit is going to grow as you expected JPY 100 billion will increase. There will be an incremental increase. Can we expect that? And this time, the profit outlook has been raised. And the capital level adjustment that you had expected at the time of compiling the midterm plan could be also raised? That is my question.

[Takayuki Yuasa, executive]

This is Yuasa speaking. Happy for the question. Let me take that question. With regards to capital level adjustment, as you know, we use ESR. We have a target range, which is the basis of our decision. And if profit level increases, ESR will also increase in line. And then share buyback and other forms of shareholder return will also likely increase. But as you correctly pointed out, and as Komiya explained earlier, the budget of JPY 100 billion will no longer be in pace, we will discontinue having a budget in place. So we will no longer have that.

But depending on the ESR situation and also business-related investments or M&A investments, those factors will have impact. So we do not have any budget in terms of shareholder returns. So those other factors will not have any impact on how much we'll be spending on share buyback. As we've been doing, we will continue our disciplined approach towards share buyback.

So flexible shareholder return tool, I thought that was, and that's where I was coming from in asking your question?

[Satoru Komiya, executive]

Thank you for your question. This is Komiya speaking. Let me supplement. With regards to shareholder return, our CFO explained it well. But what I wanted to complement is that in terms of shareholder return -- the total shareholder return policy. I think this is more or less a global standard. We do not take that approach, but the DPS, we want to increase DPS, therefore, so basis is a dividend. This is our policy. And for the stock level, it's not to say that we're going to automatically link it to ESR, but we will be eyeing ESR level and implement shareholder return in a flexible manner.

For this fiscal year, what we did at the beginning of the year, we adopted the JPY 100 billion minus alpha approach, and we have an outstanding balance of JPY 40 billion. We would execute that for sure. But when it comes to timing, of execution, we will be looking at the market and decide in flexible manner. And having said that, of course, we will be in on the situation. and execute in a flexible manner.

[Operator]

From Mitsubishi Morgan Stanley, we have Mr. Tsujino.

[Natsumu Tsujino, analyst]

Capital adjustment and change to your shareholder return policy, what you disappoint the market is that the international forecast, it's very, very conservative. Your projections are still conservative. And the performance of the international business, I think you set the standards too low. But don't you have anything more realistic? Do you have any plans to make anything more realistic on that point? Are you thinking of any ways to revise how you project your international business?

[Satoru Komiya, executive]

This is Komiya speaking. As it was asked previously, so we made an upward revision. The key drivers, we have some from domestic, some from overseas. And for the overseas businesses, we have some key drivers there, which led to upward revision. And I'm sure international business will be leading the profit growth going forward. And so that's our basic stance. And also for the international businesses, at each group company level, it's some of the parts, and so each of them contribute and accumulate and they take time and they discuss and make up the numbers one by one. So it is a certain number. It is a highly probable number that we announced as projections for the international business because of how we announce those numbers.

And with long-term target, which was JPY 500 billion, 12% ROE. From the international point of view, they have a responsibility that they need to bear. And so on top of the international business is well aware of what is expected of the international business at Tokio Marine Group. Therefore, we want to give you some highly accurate plans and at the same time, while we look at the group entirely, we need to understand the bolt-on responsibility to give in to a different part of the group. And by doing those 2, we want to be setting the projections of our international business. Tokio Marine Holdings will be involved in setting the projections for the international business.

[Natsumu Tsujino, analyst]

And so the way you create those numbers will not change, I guess?

Looking at the international business. Your peer companies, they are in the third quarter. The premium growth is slowed down in the second quarter, but then in the third quarter, it started to grow again. So looking at their 9-month performance compared to the first quarter, there is a pickup in the growth of premium by the international companies. What you have announced at this time is April to June. And premium growth, HCC, et cetera, we are seeing growth as well. PHLY also grew their premium. But July to September, I'm sure it's going to accelerate. You said that you went over at the end of October. So did you get any feelings on whether if the growth has accelerated in the most recent months? Any color on what you witnessed in the United States?

[Satoru Komiya, executive]

As it was pointed out, for the international business, the July and after quarters, we -- they are very disciplined with underwriting. Their bottom line oriented, and they should, of course, not relax. And so that kind of culture is well penetrated throughout the international companies. So looking at the major North American companies that culture is well penetrated. And so they know the important points that they need to keep. But in each line of business, there are some areas where they need to be careful. So we are setting the guideline for those international companies and where they can be more aggressive. The top line growth if you see any strength in that area from July and after in the international business, looking up the situation, it looks like the momentum is picking up. So top line growth, it will be subdued in some necessary areas but will grow in other areas, and that's what we expect of the international business.

[Operator]

Mr. Otsuka, JPMorgan.

[Wataru Otsuka, analyst]

This is Otsuka from JPMorgan. I'm on. Page 7. Again about the shareholder return. I am looking at the bottom of the chart after 2023-'24, there is more or less flat growth. And you're saying that it's sort of suggesting that you will flatten up around 50%. This 50% is looking at the global peer level that you've announced in May in this year, I think. So it's partly a comment and partly a question. But 50% stable you said, what do you mean by that?

We're not suggesting -- I'm not suggesting that this should grow to 60% or 70%. But finally, you're able to exceed the JPY 500 billion and you're very confident on that. This profit level is approaching the peer level -- global peer level. And since you are approaching that level and you're confident about that. You don't necessarily have to stick to using the same level of payout ratio at global peers, maybe you can differentiate yourself that compared to global peers?

[Takayuki Yuasa, executive]

This is Yuasa speaking. The 50% in dividend payout ratio could be a question. We don't have a clear target per se, whether 55% or 56%. But the point is that we will pay to shareholders [50%] of the remaining 50% will be used for growth and so forth. And if there is any excess capital, we will repay in the form of share buyback. So generally speaking, I think the global peers are adopting that kind of approach. And it's not that we're emulating our global peers, but this is something that will enable us to invest into new business areas. That's all for me.

[Wataru Otsuka, analyst]

Which means, so in 2023 or '24, your way of thinking will not change unless others will change?

[Takayuki Yuasa, executive]

Again, this is Yuasa speaking. It's not to say that we're eyeing our peers. What we want to do is to pay out 50%, and the remaining 50% will be first of all used for investment in growth. And we will be eyeing on ESR. And as long as we are within the target range or if we would like to exceed target range, we will take a disciplined approach and conduct share buyback. It would depend on the growth stage that the company will be in, maybe we will revise our approach and policy. But the ultimate goal for now is that we think 50% dividend payout ratio is at an appropriate level.

[Operator]

Next from Nomura Securities, we have Mr. Sakamaki-san please.

We have Sasaki-san from Bank of America.

[Futoshi Sasaki, analyst]

My name is Sasaki from Bank of America. I have one question. M&A business investment. I have some questions. This time, over the medium to longer term, your profit growth, you have a strong confidence over that. Compared to the past, the organic growth, are you less reliant on organic growth in order to achieve profit growth? Or are you still considering some proactive M&A or business investment? For a while, I know that you will be doing both on type of M&A, which you are not considering any specifics right now. But I know that you always have a short list and long list. And maybe the execution of this, the probability is low. Does it mean that you have difficulty finding companies that meet your standard? Or any other reason -- or is it that you don't really have the necessity to buy those companies? So what is the reason that you are not considering any specific cases now?

[Satoru Komiya, executive]

This is Komiya speaking, I'd like to answer your question. M&A, whether it's large scale or bolt-on type of M&A. Doing M&A is not the purpose itself, it's only a means to do our business. And also, it's partner dependent as well, whether we can find or not. And also can we find such a good partner at the right timing or not? There's another factor. We have been doing risk diversification and reduce volatility and achieve profit growth of the same environment. So there is no change to that stance to business at all. So the first step that we take in doing M&A is the risk candidate. And from that stage we go through profits, takes profits. We have the 3 principles in into M&A. And after acquiring them, we need to do a post-merger integration, and we will keep disciplined throughout the process. The long list and shortlist management, we still have those. And we do have discussions over those lists.

Right now, as we speak today, compared to some of the large positions we have done in the past, we wonder if we can find a good candidate to fit under that large acquisition category because we have gone through COVID-19, we opposed COVID-19, we have to look at the intrinsic value of each company now that everybody has lived through COVID-19. That's what we are looking at.

For bolt-on type of M&A, as it was mentioned earlier, there are some companies that -- who will be responsible for doing bolt-on type of M&A. They are leading the process. We are learning from them. Holdings will be involved in the process. But that's for what exactly is happening. Now that's what we are doing.

The second point I want to emphasize is how we look at the M&A market? Looking at the global market at market, M&A market, I believe it's still active. So augmenting the competitiveness, sell-off of the noncore business, et cetera, are all happening. And so including North America and Europe in this industry, there will be some movement, busy movements in the M&A market. I'm expecting such activities to come.

Of course, apart from that, we will keep our own strategy. We will continue to execute on our strategy. So while we are sitting in the market, we have to look at the various chemical reactions happening in the market . And I'm sure we will come up with some good candidates, including bolt-on type of M&A candidates.

Going forward, the conventional type of M&A is not the only type of M&A that we will do, but the new candidate, new appetite, new aspects, the new search process. We would buy these new methodology. But the purpose is to diversify risk and reduce volatility and to have a firm base for growing profit. And if there is a good candidate, M&A candidate contribute to that we will consider such cases. But the way we stand is as I have explained.

[Taizou Ishiguro, executive]

And with this, we would like to conclude Part 1, I would like to move to the Part 2. As I said we did not have that much time left, so I think we'll be limited to a couple of questions. But with regards to Part 2, we will have the responsible persons responding to performance of the business.

And once again, I would like to ask you to please stick to 1 question per person. We would like to take questions for Part 2. Any questions.

[Operator]

Tokai Tokyo, Majima-san, over to you.

[Tatsuo Majima, analyst]

I'm on Page 24 -- Page 42. Full year revised forecast. And for the bank, you have projections for -- revised projections for this year, JPY 30 billion revised up against the original forecast and adjusted net income plus of JPY 66 billion. And this difference represents domestic especially the changes in underwriting build of the first year. So my first question is the reason why you've made changes to the underwriting results for the first year? And for international insurance results are bit different as well? And for the adjusted and net income, why is there a difference for international business and also for underwriting results for the first year?

[Unknown Executive]

This is [indiscernible] From TMNF. With regards to the reason why we revised the underwriting results for the first year. In terms of our basis, auto insurance, we revised the loss - loss rate has been revised down. And so in relation to that, we have seen an increase in the pressure for underwriting results for the first year, and therefore, for financial accounting basis, we have made revisions.

[Tatsuo Majima, analyst]

Okay. How about for international business.

[Unknown Executive]

For international business, this is [indiscernible] from Tokio Marine Holdings, Corporate Accounting Department. Page 26, international business, plus JPY 35 billion. And on Page 42, in accounting basis, plus JPY [21] billion. So there is a difference of about JPY 10 billion between the 2.

And with regards to the difference in the financial accounting, there is goodwill appreciation, which has increased because of weak yen and also TMNF. The overseas business -- overseas liability vision is included in the overseas business. And adjusted investment income is shown here.

And on Page 26, this is January to December basis. And Page 42 for net income basis, it's April to March figure and that -- the timing is different. The difference in timing is reflected in the difference in the figures. So it was a bit of a technical aspect. Thank you very much for that.

[Operator]

From Nomura Securities, Mr. Sakamaki.

[Naruhiko Sakamaki, analyst]

My name is Sakamaki. If I look at the Page 26, the revised projections of adjusted net income compared to the original projection within the others, we have some sectors within the others. And so there's a JPY 50 billion for domestic and international put together. So of this, what are the one-off factors? Can you give me the breakdown of this difference of JPY 50 billion within the others?

[Unknown Executive]

From Tokio Marine Holdings. My name is [indiscernible] from the accounting department. If I look at Page 26, if you look at the others, for TMNF and international, what are the one-off factors within those numbers. Looking at the TMNF numbers. As it was mentioned, there was a COVID-19 impact, where loss ratio improved. So that's a major one-off factor. So it is that Mr. Komiya said earlier.

And for the international business, it was mentioned in other pages centering around North America, we had some capital gain. And In this material, we mentioned the number to be JPY 12 billion. And so out of this JPY 46 billion, part of that is JPY 12 billion coming from capital gains. That concludes my answer.

[Naruhiko Sakamaki, analyst]

For the international business, the 1 factor is that reduced the net vision underwriting reserve in Asia Life Insurance. I believe you will not have this next year. And so then the underlying earnings out of this JPY 46 billion, my understanding is this to be about JPY 47 billion actually.

[Unknown Executive]

This is [indiscernible] speaking again from the Accounting Department of Tokio Marine Holdings. So of JPY 47 billion, the Asia Life Insurance team cost is not included. But for the Asia Life Insurance, interest rate is rising, the liability is being reduced. And so although we were not including in the JPY 47 billion, this is not actually a big factor. I understand.

[Operator]

Next question will be the last question. Tsuijino-san from Mitsubishi of J Morgan Stanley.

[Natsumu Tsujino, analyst]

Upside revision for North America. Investment income was quite positive. How much did that contribute to the upward revision for the North American performance? Or if you did give a breakdown by entity?

[Tsuyoshi Nagano, executive]

This is Nagano from International Business Development Department. I do not have a breakdown by entity that I can share at this moment. But realized divestment income then the income gains from investment is increasing and also JPY 28 billion year-over-year, that's an upside -- or sorry, correction compared to the guidance at the beginning of the year, JPY 28 billion upside.

[Natsumu Tsujino, analyst]

JPY 28 billion. This is against plan?

[Tsuyoshi Nagano, executive]

Yes, against the original guidance. We have seen an upside of JPY 28 billion.

[Taizou Ishiguro, executive]

Thank you very much. We are approaching the time to conclude this conference. So we would now like to conclude this telephone conference. If you have any further questions or any clarifications, please contact us separately. Thank you very much for your participation today. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]