Tokio Marine Holdings Inc

TSE:8766

Earnings Call Transcript 2022-Q3

[Takayuki Yuasa, executive]

My name is Yuasa, Group CFO of Tokio Marine Holdings. I thank all of the participants for joining us tonight despite it's late in the day. Thank you for your interest in Tokio Marine.

Today, Tokio Marine announced its third quarter results and upward the revision to full year projections. So I am going to be explaining about that first.

Without further ado, please turn to Page 3. I have 2 points I would like to convey to you today. The first point is that third quarter earnings was very strong.

Adjusted net income for the third quarter was JPY 472.9 billion. This is a progress rate of 96.5% against the annual projection announced back in November last year.

Therefore, I believe it is fair to conclude that current business performance is robust. The second point is that based on the strong third quarter results and strong business momentum, we are making upward revision to full year projections.

Specifically, full year guidance of adjusted net income will be revised upwards by JPY 70 billion from JPY 490 billion announced in November to JPY 560 billion this time. Now I will give more details on both of these 2 points.

Please turn to Page 4. First, I will talk about top line. Third quarter results on net premiums written, excluding FX impact, increased by 4.9% year-on-year. And Life Insurance premiums increased by 0.5% year-on-year.

Both these are making good progress against our annual projections and performance is strong. Backed up by strong performance of overseas businesses, annual projection of net premiums written was also revised upward, and it is now positive 4.2% growth year-on-year.

Next, I will talk about adjusted net income. Please turn to Page 5. Third quarter result was strong, as I touched upon earlier, and this is mainly driven by TMNF and International business. To be more specific, at TMNF, in addition to the strong top line results, incurred losses declined significantly from the November projection.

This is due to decrease in natural catastrophes and large losses compared to a normal year and decrease in traffic volume due to COVID-19, which has mitigated loss ratio in the Other line of business.

As a result, we already exceeded the full year forecast by 6.5% as of the end of the third quarter. In the International business, with strong underwriting profit and investment income, we achieved a strong progress rate against the full year forecast at 92.4%.

Based on these results, we made an upward revision to our full year guidance, which I would like to discuss on Page 6.

As I mentioned earlier, we revised up the full year projection for adjusted net income by JPY 70 billion. First, TMNF is revised up by JPY 20 billion. This is because we released JPY 15 billion from the natural catastrophe budget to make the full year budget JPY 40 billion before tax.

Also, based on the recent actual results, we reviewed net premiums earned. Next, International business is revised up by JPY 45 billion. As the accounting period for the International business ends in December, we reflected the most recent results to the extent that we know.

To be more specific, as shown on the slide, underwriting results were strong, partly helped by benign nat-cat losses. On the investment front, those capital and income gains increased, and currencies worked favorably with weaker Japanese yen.

Also Other profit is revised up by JPY 5 billion. This is because sales volume of business-related equities is expected to increase by JPY 10 billion. All in all, adjusted net income is projected at JPY 560 billion.

You might rather be interested in underlying level of income as a basis to estimate FY '22 performance. Certainly, the projected JPY 560 billion includes some one-off factors such as benign nat-cat losses and capital gains in North America by approximately JPY 20 billion each or JPY 40 billion in total.

In addition, while we haven't done detailed calculations, we also assume that mitigated loss ratio under the pandemic is helping our income by about JPY 10 billion and sales volume of business-related equities have been exceeding our original plan.

In terms of our underlying performance, management team appreciates that we are capable of exceeding JPY 500 billion. I'd like to finish off my remarks with some comment on capital management, although there's no slide prepared.

Last December, we announced share repurchase of JPY 40 billion. As of the end of January, we implemented the plan by JPY 20 billion, which made our total repurchase at JPY 80 billion so far in FY '21 on a cumulative basis.

Our stock price is now exceeding JPY 7,000 with a market cap of approximately JPY 5 trillion. But as I discussed earlier, given our underlying capabilities, we think our stock is still undervalued.

So as for the remaining JPY 20 billion in the share repurchase program, we intend to make flexible decisions and execute the program. We will continue to implement our management and business strategies steadily and along with disciplined capital management, we strive to increase profit and ROE.

We would like to continue to meet expectations of capital market, and I would like to ask for your continued support.