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0:00:00.0 IR Meeting Presentation Progress of Mid-term Management Plan November 27, 2017 0:00:18.1 Table of Contents Mid and long term strategy of SOMPO Holdings 1. Group management Progress of mid-term management plan (1) ? Group Progress of mid-term management plan (2) ? Businesses Progress of mid-term management plan (3) ? Shareholder return (Reference) Progress of mid-term management plan (4) ? Stock price 2 2. Businesses 2-1. Domestic P&C insurance 4 5 6 Progress of domestic P&C insurance Combined ratio (Sompo Japan Nipponkoa) (Reference) Direct business 16 17 18 7 8 9 10 11 12 13 14 2-2. Domestic life insurance Progress of domestic life insurance Materialized products and services strategy (Himawari life) (Sompo International) PMI and further growth New business collaboration model targeting the evolution of the Group (example) Digital transformation Robust financial base and ERM for growth strategy Asset management (Reference) Numerical management targets, etc. (Reference) ESG 19 20 21 (Reference) Annualized premium in force and product mix 2-3. Nursing care & healthcare, etc. Progress of nursing care & healthcare, etc. Vision of nursing care business after mid-term management plan 22 23 24 (Reference) Key numbers of nursing care business 2-4. Overseas insurance Progress of overseas insurance Global M&A strategy (Reference) Progress by region 25 26 27 1 0:00:36.3 Mid and long term strategy of SOMPO Holdings ? Never change our vision evolving to global top 10 insurance group. ? With proactive shareholder returns, maintain capital buffer needed to execute our strategies. ? Build a sustainable growth cycle by capturing opportunities to execute growth investments, with organic growth as our fundamental premise. Our vision of growth strategy To be global top 10 after FY2020 Adjusted consolidated profit Adjusted consolidated ROE Shareholder return FY2017 (forecast) \300 billion level Over 10% \195 billion 7.6% ? Several measures progressed in line with plan, maintained profit increase ? While auto insurance rate revision, plan to achieve targets with proper measures Enhance shareholder return in accordance with growth in profit (aim at total payout ratio of 50%) Based on robust financial soundness, while focusing on SI PMI, plan disciplined M&A in future Progressed to materialize digital technology in 1H FY2017 Insurance business profitability remains stable, nursing care business turned to be profitable Investment In growth fields Adapt to environmental changes Digital transformation, etc. 安定的 収益性 Generate stable profit Robust capital base Maintain and enhance profitability in existing businesses ? Achieve steady organic growth in each business ? Realize business collaboration model led by nursing care business, etc. ? Harness a solid capital base ? Select high ROE fields (Overseas M&A, etc.) + 2 0:02:29.6 1. Group management 2. Businesses 2-1. Domestic P&C insurance 2-2. Domestic life insurance 2-3. Nursing care & healthcare, etc. 2-4. Overseas insurance 3 0:02:33.7 1. Group management Progress of Mid-term Management Plan (1) ? Group ? Adjusted consolidated profit (adjusted EPS) has been expanding steadily toward achieving FY2018 targets. ? Based on accumulated profit, adjusted consolidated ROE is expected to improve further. Adjusted consolidated profit*1 (Billions of yen) Adjusted EPS*2 Adjusted consolidated ROE*1 \300 bn. level Vision Aim at around 9% +11.7 220 to 230 205.0 195.0 164.3 183.2 7.6% 7.6% Over 10% 6.9% Over 8% Target \501 \326 \461 Target Vision (Reference) ROE(J-GAAP) 9.2% 9.7% 8.2% about 12% 1H Actual 29.9 FY2015 (Actual) FY2016 (Actual) FY2017 (Previous)(Revised) FY2018 (Plan) After FY2020*3 (Image) FY2015 (Actual) FY2016 (Actual) FY2017 (Revised forecast) FY2018 After FY2020*3 (Image) (Plan) *1 See page 13 for definitions of adjusted consolidated profit and adjusted consolidated ROE. *2 Adjusted EPS = adjusted consolidated profit / the number of issued stocks ( excluding portion of share buy-back, etc.) *3 We will set targets in FY2020, after consideration by end of FY2018 4 0:04:09.1 1. Group management Progress of Mid-term Management Plan (2) ? Businesses ? Base operations in each business are progressing steadily, aiming at achieving FY2018 targets. Adjusted profit by segment and key factors Domestic P&C insurance Adjusted profit (Billions of yen) Base combined ratio excluding one-time factors remains stable. Expected to achieve the plan. Domestic life insurance Policies in force expand. Toward achieving the targets, progressed steadily. Nursing care & healthcare, etc. Occupancy rate of nursing facilities has been improving. Expected to achieve the plan. Overseas insurance Based on SI profit accumulation, expected to outperform the plan. Over 134.9 100.2 120.0 1H Actual 48.9 29.1 28.0 1H Actual 14.7 Over 32.0 -0.7 FY2018 (plan) Over 8.0 3.6 1H Actual 1.5 63.1 19.9 Over 60.0 FY2016 FY2017 FY2018 (Actual) (Forecast) (Plan) FY2016 (Actual) FY2017 (Forecast) FY2016 FY2017 FY2018 (Actual) (Forecast) (Plan) FY2016 FY2017 FY2018 (Actual) (Forecast) (Plan) * 1H actual FY2017: - \35.2 billion Key indicators target range FY2018 Combined ratio 92 to 94% +1.2pt 95 .2% 96.4% 1H actual 93.4% Policies in force Over 5 million +0.17mn. 3.92 mn. 4.09 mn. 1H actual 3.98 mn. Occupancy rate* Over 90% +4.3pt 83.7% 88.0% 1H actual 86.5% Premiums written Over \750 bn. +284.5bn. \636.3 bn. \351.7 bn. 1H actual 369.2 95.0%* FY2016 (Actual) FY2017 (Forecast) FY2016 (Actual) FY2017 (Forecast) FY2016 (Actual) FY2017 (Forecast) FY2016 (Actual) FY2017 (Forecast) * Excluding hurricanes in North America and other large losses 5 * Sum of SOMPO Care Message and SOMPO Care Next 0:04:48.5 1. Group management Progress of mid-term management plan (3) ? Shareholder return ? Unchanged shareholder return policy, aim at enhance the total amount of shareholder return in accordance with profit expansion. ? Our policy is to determine the balance of dividends and share buybacks while closely monitoring the stock price level, dividend yield and related factors. History of shareholder returns (Billions of yen) Total shareholder return yield*1 5.7% 5.1% 3.0% 3.2% (Reference) DPS Dividend yield*3 Raise DPS for 4th consecutive years 91.6 56.2 65.8 33.5 32.3 FY2015 132.0 50% \3,188 34.7 Share buyback Cash dividend 45.6 17.0 28.6 FY2014 90.8 50% \3,735 +20 10.0 24.7 FY2013 35.4 FY2016 183.2 50% \4,079 42.3*2 FY2017 (Forecast) 195.0 - - +10 +10 +10 \110 \80 2.5% \90 FY2018 (Plan) \60 2.3% \70 1.9% 2.2% Adjusted consolidated profit Total payout ratio (Reference) share price (End of fiscal year) 15.8 220% \2,652 220 to 230 - - FY2013 FY2014 FY2015 FY2016 Interim \55 FY2017 (Forecast) Shareholder return policy Aim at attractive shareholder return through stable dividend and flexible share buyback, taking into account dividend yield or DPS growth. (Target level of total payout ratio: around 50%*4 over medium term.) * Determine balance of dividends and share buybacks based on stock price and relative level of dividend yield, etc. 6 *1 Total shareholder return yield = (Cash dividend + Share buyback) / Market cap. as of end of FY *2 The interim dividend is \21.3 billion (approved) *3 Dividend yield = Cash dividend / Market cap. as of end of FY *4 Total payout ratio = (Cash dividend + Share buyback) / Adjusted consolidated profit Could be adjusted based on capital level, ROE, etc. 0:05:51.5 1. Group management (Reference) Progress of mid-term management plan (4) ? Stock price ? Since announced mid-term management plan on 26 May 2016, our stock price has progressed steadily. Progress of stock price(from 26 May 2016 to 31 October 2017) Our price TOPIX TOPIX Sector Index (Insurance) *Indexed with the stock price on 26 May 2016 set as 100 (left axis). Our market capitalization (right axis) 140 130 120 110 100 90 80 26 May 2016 End of August End of November End of February 2017 End of May End of August 2.6 2.4 2.2 2 +7.3% 兆 +13.0% 150 2.8 (Trillion yen) 1.8 1.6 1.4 1.2 1 7 0:06:44.8 1. Group management (Sompo International) PMI and further growth ? Post-Merger Integration (PMI) progressed steadily. While advanced measures such as optimizing the organization, quantitative benefits started to materialize as well. ? Evolve SI into a global platform of the Company, while targeting further growth of the group. Advanced PMI and evolution into a global platform Completion of acquisition* (28 March 2017) Acquisition cost: \683.1 billion PBR: 1.36x PMI (from FY2017) Further growth Achievement (typical examples) (Organization) ? Started SI evolution into a global platform * Integrate existing companies in the U.S. and Europe going forward Main materialized benefits Started to provide specialty insurance ? Optimize SOMPO licenses * Written premium in FY2017: around \0.2 billion (forecast) SOMPO Licenses ~32 countries~ 1 to Japanese clients × (Underwriting) ? Unified certain insurance underwriting standards (overseas) * introduced shared systems SI Underwriting know-how 2 Realized financial synergies and related factors. * By optimizing group credit strength, reduced cost for reinsurance guarantee, etc.( over \2.0 billion) ? SI growth target(Net written premium) CAGR:+10%~15%(for around next 3 years) ? Other than SI, aim at expanding centered on specialty insurance such as crop insurance ? Started Agri Sompo network * build crop insurance platform (ERM) ? Ensure Group-wide consistency of ESR calculation and global risk accumulation management methods 3 (HR) ? Initiated personnel exchange programs aimed at integration of personnel systems. A decrease in tax expenses in connection with the reorganization of SI, etc. * FY2017(forecast) includes + \71.1 billion. ? By bolt on M&A, etc. continue enhancing specialty lines and underwriters * On the completion date of the acquisition, Endurance changed its brand to Sompo International (We use SI hereafter). 8 0:09:33.6 1. Group management New business collaboration model targeting the evolution of the Group (example) ? Link organically between the business platforms of the P&C and life insurance businesses, where we have extensive expertise, and the nursing care business we have entered into. Development led by nursing care business (image) Enhance profitability while developing high-value-added Group services by organically linking the nursing care business and insurance businesses using services related to extending healthy life expectancy, such as dementia prevention. Domestic (Under consideration) P&C Develop services related to dementia prevention, etc. Nursing care and healthcare Comprehensive collaboration in September 2017 Joint research with the National Center for Geriatrics and Gerontology (Consider going forward) Overseas Replicate these services overseas Released in April 2017 Demestic life Developed option to cover long-term care Domestic (Consider going forward) life Develop highly compatible insurance products Insurance (Consider going forward) Harness insurance-based finance functions Nursing care and healthcare Entered in FY2015 Refer customers to nursing care facilities Domestic (Under consideration) P&C Provide services to detect dementia at an early stage 9 0:11:35.9 1. Group management Digital transformation ? First, implement digital technologies that help to enhance productivity, primarily in the domestic P&C insurance business. ? Research and trials designed to strengthen customer interfaces, etc. are accelerating, including in the nursing care and domestic P&C insurance businesses. Development of digital strategy 3 Transform business model 2 Implementation and R&D phase Official implementation All cases in domestic P&C (Sompo Japan Nipponkoa) Smiling road [Safety driving discount, accident prevention] (Saison auto) “Connect button” [accident impact detection] Research and trial phase Cases weight: Domestic P&C 70%, nursing care 20%, domestic life 10% (Sompo Japan Nipponkoa) Enhance productivity 75% Easy quotation[by smart phone premium quotation] Conversation auto text-writing Utilize AI at call centers, etc. 8 cases Strengthen customer interfaces 25% 64 cases Strengthen customer interfaces 61% Enhance productivity 39% (Nursing care) Face recognition and sensor[Watching over] (All businesses) Utilize RPA* [make processing efficient] 1 Enhance digital strategy structure Tokyo (Sompo Japan Niipponkoa) Utilize Big data [accident and insurance data] (Life) Wearable device[support health] The framework is continuously undergoing evolution and optimization. (Life)Utilize AI [streamlining of business negotiations] Silicon Valley * RPA (Robotics Process Automation):automation of operation by robot, etc. 10 0:13:15.4 1. Group management Robust financial base and ERM for growth strategy ? Achieve the stable growth of the Group based on the fundamental premise of maintaining and enhancing a robust financial base by implementing ERM thoroughly. ESR(99.5%VaR)progress forecast Organic increases in ESR in the range of +5% to nearly 10% are expected every year mainly through the steady reduction of strategic-holding stocks, in addition to retained earnings, while proactively implementing shareholder returns. Our financial position will enable the further investments in growth fields, etc. 250% 226% Target level (Reference)Comparison in ESR with European insurance companies* 226% 219% 201% 193% 193% 163% 180% FY2017 1H actual (forecast) FY2018 (Image) FY2019 (Image) FY2020 (Image) Our ESR Euro A Euro B Euro C Euro D Euro E Implement ERM thoroughly (Our main initiatives) - Reform a global ERM framework - Support appropriate management decision-making on all fronts, including product development and M&A activity. - Reflect the return on risk (ROR) indicator in compensation for officers and other remuneration, etc. - Accelerate Group-wide penetration of an ERM culture * SOMPO uses ESR (99.5%VaR) as of end of September 2017. * Other companies use solvency ratio based on Solvency II as of end of June 2017. 11 0:14:25.5 1. Group management Asset Management ? Remain unchanged policy to keep reducing strategic-holding stocks. ? Policy of promoting ALM, considering characteristics of liability, liquidity, safety, etc. Status of asset management <Balance of investment assets (Trillions of yen)> *end of September 2017, group-wide basis Others 0.4 Foreign securities 3.1 Deposits, etc. 1.0 → Reduction of strategicholding stocks Plan to reduce \100 billion per annum on fair value basis. * By 1H FY2017, reduced \81.0 billion (including hedges) Measures for low interest rate ? Diversify investments, such as foreign currency assets. ? Sophisticate asset management, such as growth investment, monitoring credit risk Domestic bonds 3.5 Balance of strategic-holding stocks on book value (Plan and actual) (Billions of yen) Total \10.6 tn. Government bonds 2.6 -59% 1,241.2 Domestic stocks 1.6 Corporate and municipal bonds 0.9 Income yield* (Sompo Japan Nipponkoa) 2.27% 2.36% 2.20% -30% 509.4 ・・・ End of FY2000 End of FY2016 → Loans 0.6 FY2015 FY2016 1H FY2017 ・・・ End of FY2020 Arrow is image of direction of asset allocation. * Excluding group companies’ stocks, etc. * End of 1H 2017: balance \497.4 billion 12 1. Group management (Reference) Numerical Management Targets, etc. Numerical management targets FY2016 (Billions of yen) (Actual) (1H actual) 48.9 14.7 1.5 -35.2 Definition of adjusted profit FY2017 (forecasts) Announced on November 2017 FY2018 (Plan) Reviewed and Announced on November 2016 Domestic P&C insurance Net income + Provisions for catastrophic loss reserve (after tax) + Provisions for reserve for price fluctuation (after tax) ? Gains/losses on sales of securities and impairment losses on securities (after tax) ? Special factors (e.g. dividend from subsidiaries) Domestic P&C insurance*1 Domestic life insurance Nursing care & healthcare, etc. Overseas insurance Total (Adjusted consolidated profit) 134.9 29.1 -0.7 19.9 100.2 28.0 3.6 63.1 Over 120.0 Over 32.0 Domestic life insurance Over 8.0 Over 60.0 Net income + Provision of contingency reserve (after tax) + Provision of reserve for price fluctuation (after tax) + Adjustment of underwriting reserve (after tax) + Deferral of acquisition cost (after tax) ? Depreciation of acquisition cost (after tax) 183.2 29.9 195.0 220.0 ? 230.0 Nursing care & healthcare, etc. Adjusted consolidated ROE*2 7.6% -- 7.6% Over 8% Net income Overseas insurance (Reference) ROE (J-GAAP) 9.7% -8.2% Around 10% level Net income (including major non-consolidated subsidiaries) Adjusted profit of SI (Endurance) is operating income*3 *1 Total of Sompo Japan Nipponkoa, Saison Automobile & Fire, Sonpo 24, Sompo Japan Nipponkoa Insurance Services, DC Securities and Sompo Risk Management & Healthcare (from FY2017) *2 Adjusted consolidated ROE = Adjusted consolidated profit / Adjusted consolidated net assets (The denominator is the average balance at the end/start of each fiscal year.) Adjusted consolidated net assets = Consolidated net assets (excluding life insurance subsidiary’s net assets) + Catastrophic loss reserve in domestic P&C insurance (after tax) + Reserve for price fluctuation in domestic P&C insurance (after tax) + Domestic life insurance adjusted net assets Domestic life insurance adjusted net assets = Net assets (J-GAAP) + Contingency reserve (after tax) + Reserve for price fluctuation (after tax) + Adjustment of underwriting reserve (after tax) + Non-depreciated acquisition cost (after tax) *3 Adjusted profit of SI (Endurance) is defined as operating income, which excludes one-time factors (operating income = net income - net foreign exchange gains/losses - net realized and unrealized gains/losses - net impairment losses recognized in earnings, etc.). Forecasts for the overseas insurance business in FY2017 include a decrease in tax expenses in connection with the reorganization of SI. 13 0:15:21.3 1. Group management (Reference) ESG ? Strive to increase the sophistication of information disclosure through integrated annual report and other means, while proactively pursuing ESG initiatives. Typical initiatives ? ? ? Supply insurance products addressing global environmental problems Set up eco-funds (Sompo Japan Nipponkoa Asset Management) Activities to promote widespread adoption of environmental conservation in collaboration with NPOs and other entities Environment ? ? ? ? Initiatives for prevention and reduction of accidents and disasters Develop diversity Enhance productivity Social Governance ? ? ? Evolution of the group management system (Introduction of the business owner system and the Group CxO system) Compensation for officers linked to corporate business performance Seven individuals among the 17 Directors and Audit & Supervisory Board members are outside officers. The Nomination and Compensation Committee is chaired by an outside director. Topics Inclusion in Socially Responsible Investment (SRI) indexes and other indexes SRI(社会的責任投資指数)などへの組入れ ? Selected for inclusion in the Dow Jones ? Adopted by all ESG indexes selected by the Sustainability Index for 18 consecutive years Government Pension Investment Fund (GPIF) (longest-running record for a Japanese company). Awarded for the highest rank ? Selected for inclusion in the highest rank (A rank) of the CDP* climate change list for two consecutive years. 1. FTSE Blossom Japan index 2. MSCI Japan ESG select leaders index 3. MSCI Japan Empowering Women Index 14 ※International project on climate change strategy, etc. 0:16:15.8 1. Group management 2. Businesses 2-1. Domestic P&C insurance 2-2. Domestic life insurance 2-3. Nursing care & healthcare, etc. 2-4. Overseas insurance 15 0:16:21.4 Domestic P&C Domestic life Nursing care & healthcare, etc. Overseas Progress of Domestic P&C Insurance ? In 1H FY2017, base Profitability remains stable, while the impact of hurricanes in North America, etc. ? Expected to achieve the targets of adjusted profit FY2018, mainly due to the gradual materialization of cost savings benefits, etc. Plan for adjusted profit (Billions of yen) Assume CAGR of about +4% CAGR about +2% Mainly based on the gradual materialization of cost savings benefits, in addition to the absence of the impact of natural disasters in the last fiscal year about +20.0 Net premiums written (Sompo Japan Nipponkoa)* (Billions of yen) Assume CAGR of about +1% Investment profit upturned according to favorable market condition. 134.9 111.9 100.2 2,189.5 2,148.7 2,166.8 2,260.0 Over 120 1H Actual 1103.7 1H Actual 48.9 FY2015 FY2016 FY2017 (Revised forecast) FY2018 (Plan) FY2020 (Image) FY2015 FY2016 16 * Presented by adjusting reinsurance policies scheduled for successive transfer to overseas subsidiaries: Deducting the portion of the total transfer amount (approx.\30.0billion) that has yet to be transferred in each fiscal year. FY2017 (Revised Forecast) FY2018 (Plan) FY2020 (Image) 0:16:40.6 Domestic P&C Domestic life Nursing care & healthcare, etc. Overseas Combined ratio (Sompo Japan Nipponkoa) ? Net loss ratio is expected to be steady, net expense ratio projects to decrease slightly. Combined ratio (Sompo Japan Nipponkoa) Net loss ratio*1 Profitability keeps on improving trend due to top-line growth. Factor occurring going forward Voluntary auto insurance rate revision (Jan. 2018) Initiatives to increase voluntary auto insurance premium rates Optimizing Fire and allied lines rate Growth in other line Net expense ratio Initiated upfront investment enhancing productivity for future*3. Effect will be realized gradually after FY2018. Combined ratio Remain unchanged policy of keep combined ratio below 95% level 1H FY2017 actual: 93.4% - + 64.3% 63.7% 63.2% + + 96.4% 32.0% 32.1% 95.3% 95.2% 31.6% 95.0%*2 62.9%*2 FY2015 FY2016 FY2017 (Revised forecast) FY2018 (plan) After FY2020 FY2015 FY2016 FY2017 (Revised forecast) FY2018 (plan) After FY2020 FY2015 FY2016 FY2017 (Revised forecast) FY2018 (plan) After FY2020 *1 Loss ratio is on a written paid basis *3 The amount of upfront investments In FY2017 (forecast): around \10.0 billion (including loss adjustment expense). *2 Excluding hurricanes in North America and other large losses 17 0:17:34.9 Domestic P&C Domestic life Nursing care & healthcare, etc. Overseas (Reference) Direct Business Policies in force of “Otona no Jidosha Hoken*3” Progress steadily in line with the plan toward turning to be profitable in FY2020. Market share in direct automobile insurance market Due to “ALSOK reliable accident site support service,” etc. top line growth rate*1 is the No. 1 in the market for 2 consecutive years. Market share has been continuously expanding. Market share in the direct market (10 thousands) +3.9pt +24% 12.9% 78 62 94 To about 1.2 million 9.0% 7.5% 50 1H actual 69 FY2015 FY2016 FY2017 *2 FY2015 FY2016 FY2017 (Forecast) FY2018 (Plan) FY2020 (Image) *1 +22% year on year ( Reference: market average increase ratio +6%) *2 Until 1Q FY2017 *3 Mainstay direct product name of Saison Auto. 18 0:17:48.3 Domestic P&C Domestic life Nursing care & healthcare, etc. Overseas Progress of Domestic life insurance ? Progressed steadily in 1H FY2017. Plan for adjusted profit (Billions of yen) Assume CAGR of about +6% Premium and other income (Billions of yen) Assume CAGR of about +5% CAGR about +4% CAGR about +5% Upturned because paid claims were less than in normal years. Profit increase due to steady expansion of policies in force Over 500 396.4 419.5 439.3 450.0 30.4 Over 32 29.1 28.0 1H actual 14.7 1H actual 213.7 FY2015 FY2016 FY2017 (Revised forecast) FY2018 (plan) FY2020 (image) FY2015 FY2016 FY2017 (Revised forecast) FY2018 (plan) FY2020 (image) 19 0:18:17.5 Domestic P&C Domestic life Nursing care & healthcare, etc. Overseas Materialized products and services strategy (Himawari life) ? Aim to evolve into a health support enterprise by going beyond boundaries of “insurance.” ? Increase the number of customers and earnings in the future through new business model. New products and services product revision Nov. 2017 product revision Apr. 2017 new product Sep. 2016 One-time hospitalization benefit and outpatient treatment benefit rider Successively supply products and services to realize the business model we envision Connected Enhance to Concept health お客さまとつながる customers (Reference ) business model ? Establish lifelong connection with customers. ? Accelerate growth strategy centered on health service brand “Linkx (Link cross).” Increase the number of customers by providing health-related services one by one. Option to cover long-term care One-time benefits are paid out upon Care Level 1 certification Service Linkx coins (Online product) One coin insurance Insured for Advanced medical, etc. new service new service Apr. 2017 new service Oct. 2016 Nov. 2017 Linkx Household account books (personal asset and household account management app) Proactively develop products from customers’ perspective, such as a product utilizing vital data. Himawari Life connects digitally with customers through products and services, and high-quality sales representatives follow them. Product Channel Linkx reco (App to support life style) Linkx aruku (App to support walking) Linkx siru (App to provide health-related information) 20 Domestic P&C Domestic life Nursing care & healthcare, etc. Overseas (Reference) Annualized premium in force and product mix Annualized premium in force By providing new product at proper timing, etc. expand policies in force centered on protective product Apr. 2017 launched Option to cover long-term care Product mix(the number of policies in force) While keeping highly profitable product mix, aim to grow continuously (Billions of yen) May 2014 launched New medical insurance Increasing term life, etc. 5% Whole life 22% Term life (Income compensation, etc.) 15% Aug. 2008 launched Medical insurance 332.8 370.0 357.6 317.4 1H actual 364.7 385.0 Saving-type products 27% 308.5 300.5 267.1 265.9 Total 3.98 million Others 9% 275.8 286.2 at the end of 1Q実績 September 2017 3,611 Medical 49% Protection-type products 73% FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 (forecast) FY2018 (plan) Protection-type products: Medical, cancer, income compensation, and term life insurance (excluding long term life and increasing term life insurance), etc. 21 0:19:10.2 Domestic P&C Domestic life Nursing care & healthcare, etc. Overseas Progress of Nursing Care & Healthcare, etc. ? In nursing care business, occupancy rate has been improving steadily. The business became profitable. Plan for adjusted profit Occupancy rate Nursing care & healthcare Asset management, etc. SOMPO Care Message SOMPO Care Next End of FY2017 (Forecast) (Billions of yen) Assume CAGR of about +50% Over +8.7 Over 8 Become profitable mainly due to improving occupancy rate 95% End of 1H FY2017 90% 88.3% 90.3% 85% 83.2% 84.0% 80% 3.6* 1.5 -0.7 75% With increasing residents, occupancy rate kept improving 70% Apr. 2015 Apr. 2016 Apr. 2017 FY2015 FY2016 FY2017 (Forecast) FY2018 (Plan) FY2020 (Image) * Occupancy rate = the number of residents / capacity of facilities * 1H FY2017 Actual : \1.5 billion 22 0:20:08.2 Domestic P&C Domestic life Nursing care & healthcare, etc. Overseas Vision of nursing care business after mid-term management plan ? Maximize the use of the Group’s resources in conjunction with continuously maintaining and enhancing internal management. ? Aim to maintain capital efficiency at a certain level. Vision of nursing care business(image) ROE target of nursing care business: At least a double-digit level Maintain and evolve the framework Enhance integrated operation Develop new sources of earnings Utilize the Group’s customer base and accelerate Group collaboration Generate earnings from athome nursing care services Accelerate the integration of Sompo Care brand Maintain and enhance the framework Increase the stability and sophistication of management systems, and accelerate the human resources strategy (enhance quality and reduce the turnover ratio through optimal human resources development) Address at-home nursing care needs Utilize ICT and digital Expand into the seniors market. Develop peripheral nursing care businesses, including lifestyle support services for seniors. Implement AI and sensor technology, etc. to enhance productivity and stability. 23 0:21:44.6 Domestic P&C Domestic life Nursing care & healthcare, etc. Overseas (Reference) Key numbers of nursing care business Inflow of residents* Trend in the number of users of at-home nursing care services (Headcount) 300 200 100 (Headcount) 40,000 End of 1H FY2017 36,451 35,000 0 △100 △200 Increasing trends from June 2016 Expanded mainly due to a higher weighting of sales activities 30,000 △300 Apr. 2015 Apr. 2016 Apr. 2017 Apr. 2015 Apr. 2016 Apr. 2017 * Sum of SOMPO Care Message and SOMPO Care Next Inflow of residents = the number of new residents ? the number of departing residents 24 0:21:49.2 Domestic P&C Domestic life Nursing care & healthcare, etc. Overseas Progress of Overseas Insurance ? Mainly due to the growth of SI, FY2018 targets could be outperformed. Plan for adjusted profit (Billions of yen) Assume CAGR of about +30% *Organic about +10% Premiums*1 (Billions of yen) Assume CAGR of about +20% *Organic about +10% CAGR about +70% *Organic about +5% Outperformance is possible mainly based on the effect of SI CAGR about +40% *Organic about +5% 63.1 Over 60 636.3 351.7 1H actual 369.2 about 750 18.7 19.9 294.3 FY2015 FY2016 FY2017 FY2018 (Forecast) (Plan) FY2020 (Image) FY2015 FY2016 FY2017 FY2018 (Forecast) (Plan) FY2020 (Image) * 1H FY2017 actual: - \35.2 billion * FY2017 forecast includes a decrease in tax expenses in connection with the reorganization of SI. *1 Net premiums written of subsidiaries and affiliates reflect holding shares of each company. This treatment does not coincide with financial statements. 25 0:22:50.2 Domestic P&C Domestic life Nursing care & healthcare, etc. Overseas Global M&A strategy ? Consider selectively M&As that will enhance Group profit and ROE in a disciplined manner. Typical criteria of M&A Our policy is to selectively consider M&As that will enhance Group capital efficiency based on a robust financial base, according to the following perspectives Developed countries From the viewpoint of risk diversification, business fields targeting corporate customers, where profit contribution is possible at an early stage and capital efficiency is higher. Emerging countries Investments that offer prospects for future market expansion in the retail business and will help to increase market share. ‘Unique and uncommon’ is also the key 新興国 31% Direct P&C (Specialty) Large market scale Stable market growth e.g. North American Corporate Asia and Middle East Large population with high growth potential and stable profitability Reinsurance Cautiously consider options while closely monitoring the hardening reinsurance market and other trends Latin America Large population with high growth potential 26 0:24:22.5 Domestic P&C Domestic life Nursing care & healthcare, etc. Overseas (Reference) Progress by region Net income by region Developed countries (North America and Europe) ? In 1H FY2017, while the impact of hurricanes in North America, full year results are expected to increase mainly due to the effect of SI consolidation. ? In FY2018, mainly due to further contribution of SI, could outperform the targets. CAGR about +110% (Billions of yen) Asia & Middle East ? In 1H FY2017, favorable L/R and investment income of SJ Sigorta (Turkey) contributed to profit expansion. ? In FY2018, aim to out perform the targets centered on strong SJ Sigorta. Latin America ? While in 1H FY2017 lowering earnings mainly due to a downturn in the performance of specific policies, implemented changes in underwriting conditions. ? In FY2018, by the Initiatives for further optimizing underwriting and cost reduction, etc. plan to increase in profit. Could be over 50.0 CAGR about +5% CAGR about +8% 52.9 Could be over 7.0 11.0 8.6 6.3 2.5 Over 3.0 1.6 FY2017 (forecast) FY2018 (plan) FY2016 FY2017 (forecast) FY2018 (plan) FY2016 FY2017 (forecast) FY2018 (plan) FY2016 * 1H FY2017 actual: - \40.3 billion FY2017 forecast includes a decrease in tax expenses in connection with the reorganization of SI. * 1H FY2017 actual: \5.3 billion * 1H FY2017 actual: - \0.1 billion 27 Note Regarding Forward-looking Statements The forecasts included in this document are based on the currently available information and certain assumptions that we believe reasonable. Accordingly, the actual results may differ materially from those projected herein depending on various factors. Contacts Investor Relations Team, Office of Group CEO Telephone Fax E-Mail URL : : : : +81-3-3349-3913 +81-3-3349-6545 ir@sompo-hd.com http://www.sompo-hd.com/en/ 0:24:32.5 0:24:56.0 0:32:04.2 0:36:40.4 0:45:08.9 0:52:42.0 0:57:17.1 1:00:03.5 1:02:13.3 Kengo Sakurada President(Group CEO)