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0:00:00.0 IR Meeting Presentation Progress of Mid-term Management Plan and Direction of Management Strategy November 26, 2018 0:00:05.2 Table of Contents 1. Group management Progress of Group management and direction of mid-term strategy Overseas insurance 4 5 6 7 8 9 10 11 12 13 Progress of overseas insurance Key points for overseas business Domestic life insurance Progress of domestic life insurance Key points for domestic life insurance Nursing care & healthcare, etc. Progress of nursing care & healthcare, etc. Key points for nursing care business 3. Reference Group asset management Penetration and progress of ERM management Enhance corporate value through advanced initiatives for ESG 17 18 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 19 20 Progress of mid-term management plan (4) -Achievements of first half of mid-term management plan Direction of mid-term strategy (1) -Group qualitative evolution (Transformation) Direction of mid-term strategy (2) -Direction of business and strategy, and steady growth 21 22 (Reference) Group common initiatives Direction of mid-term strategy (3) - Robust financial base and capital allocation Business portfolio transformation 2. Businesses Domestic P&C insurance Progress of domestic P&C insurance Key points for domestic P&C insurance 24 25 26 27 28 15 16 Stock price (Total shareholder return) Numerical management targets, etc. 2 0:00:19.0 1. Group management Progress of Group management and direction of mid-term strategy - Progress of mid-term management plan - Direction of mid-term strategy - Business portfolio transformation 2. Businesses Domestic P&C insurance Overseas insurance Domestic life insurance Nursing care & healthcare, etc. 3. Reference 3 0:00:33.2 1. Group management Progress of Group Management and Direction of Mid-term Strategy ? While we steadily execute our strategies, in light of the external environment and other factors, we recognize the need for further qualitative evolution on a Group-wide basis. ? Achieve evolution contributing to business expansion and higher efficiency, and aim at long-term sustainable and stable growth. Achievements so far and concepts of mid-term strategy Evolving to global top 10 level insurance group Executed mid-term management plan steadily <Refer to P5 to P8> Typical achievements ? Merged SI* and evolve into a global platform ? Accelerated to develop new products and services ? Built trilateral structure of digital strategy ? Enhanced group governance structure ? Streamlined through merger of main 2 P&C entities ? Accelerate overseas expansion and develop system ? Steady growth of Domestic life business ? Entered into nursing care business ? Reduced strategic holding stocks as planned, ERM penetrated the Group Phase aiming for further qualitative evolution <Refer to P9 to P12> Concept of mid-term strategy Qualitative evolution into a Group capable of maintaining steady profit/EPS growth and capital efficiency above the cost of capital Mid and long term target level Adjusted \300.0 billion consolidated profit level Adjusted consolidated ROE Over 10% Group overwhelming qualitative evolution Each business evolution (Theme park synergy) Further globalization Portfolio optimization Anticipated change in environment Decrease in domestic population, Drastic change in technology, Risk of climate change, Consumption tax hike and amendment of the law of obligations, Shift of global situation, Voluntary adoption of IFRS, etc. * SI stands for Sompo International 4 0:02:40.3 1. Group management Progress of Mid-term Management Plan (1) ? Group ? While executed strategy steadily, mid-term management plan progressed as planned. (Deliver higher earnings in FY2018 after adjusting domestic natural disasters) ? By achieving the Group’s qualitative evolution, aim at enhancing adjusted consolidated profit, EPS and capital efficiency further. Adjusted consolidated profit*1 Adjusted consolidated profit Adjusted consolidated ROE*1 Adjusted consolidated profit*3 (after adjustment of domestic natural disasters) Adjusted consolidated ROE Adjusted consolidated ROE*3 (after adjustment of domestic natural disasters) Adjusted EPS*2 (Billions of yen) +38.0 \300.0 bn. level 7.9% 7.8% 6.6% 7.6% 7.8% Over 10% 190.1 188.9 169.2 207.3 6.9% 6.4% 164.3 183.2 162.7 105.0 (Reference) ROE (J-GAAP) 9.2% 9.7% 7.6% 4.0% 8.8% \326 FY2015 \461 FY2016 \420 FY2017 \281 FY2018*4 (forecast) FY2020 (Vision) Mid and long term target FY2015 FY2016 FY2017 FY2018 (forecast) FY2020 (Vision) Mid and long term target *1 See page 28 for definitions of adjusted consolidated profit and adjusted consolidated ROE. (Reference) Adjusted consolidated net assets (average balance of beginning and end of FY) FY2015: 2,378.3, FY2016:2,403.3, FY2017:2,553.9, FY2018(forecast):2,611.8 (billions of yen) *2 Adjusted EPS = adjusted consolidated profit / the number of issued stocks (excluding portion of share buy-back, etc.) *3 Revised adjusted consolidated profit and adjusted consolidated ROE, assuming an incurred loss on domestic natural disasters of \48.0 billion (equivalent to the historical average and estimated amount in initial forecasts for FY2018) *4 Adjusted consolidated profit of 1H FY2018 actual is \28.3 billion 5 0:03:35.6 1. Group management Progress of Mid-term Management Plan (2) ? Businesses ? While bottom-line of each business steadily expands, aim at qualitative evolution. Adjusted profit by segment and typical key factors (億円) Adjusted profit (Billions of yen) Increase profit after adjustment of domestic natural disasters Combined ratio*2 Accelerating proper pricing and higher efficiency, aim at the target level (92% to 94%) Adjusted profit (Billions of yen) Achieve organic growth of profit Premium written Premium written expand centered in specialty line on global base +24.0 91.9*1 116.0*1 +5.9pt +9.9 101.8% 94.9%*1 +\23.3 bn. 85.3 14.0 FY2017 FY2018 (forecast) *3 44.0 54.0 1H actual 27.1 \515.4 bn.*4 \538.7 bn. 1H actual 321.5 95.9% FY2017 FY2018 *3 (forecast) FY2017 *1 Revised number, assuming an incurred loss of \48.0 billion and net claims paid of \43.0 billion on domestic natural disasters (equivalent to the historical average and estimated amount in initial forecasts for FY2018) *2 excl. CALI, household earthquake *3 1H FY2018 actual: adjusted profit -\19.4 bin. , combined ratio 95.5% FY2018 (forecast) FY2017 FY2018 (forecast) Domestic P&C Domestic Life Overseas Nursing care & healthcare, etc. *4 excl. Sompo Canopius portion Adjusted profit (Billions of yen) Increase profit steadily mainly based on expansion of policies In force Policies in force Partly due to launching new product, policies in force expand Adjusted profit (Billions of yen) increase in light of occupancy rate improvement Occupancy rate*5 Steadily improve +0.8 +2.7 29.2 32.0 +0.15mil. 5.0 4.1 1H actual 2.8 +1.9pt 4.04 mil. 1H actual 17.7 4.20 mil. 1H actual 4.09 mil. 88.9% 90.8% 1H actual 89.6% FY2017 FY2018 (forecast) FY2017 FY2018 (forecast) FY2017 FY2018 (forecast) FY2017 FY2018 (forecast) 6 *5 Sum of former SOMPO Care and SOMPO Care Next 0:03:36.8 1. Group management Progress of Mid-term Management Plan (3) ? Shareholder Return ? Projected to raise DPS in FY2018 for 5th consecutive years. Execute share buyback steadily taking into account stock price, etc. (Decided to cancel treasury stocks) History of shareholder returns (Billions of yen) Total shareholder return yield*1 5.1% 3.0% 5.7% 4.9% (Reference) DPS Dividend yield*3 Raise DPS for 5th consecutive years 91.6 81.3 56.2 +\20 +\10 +\10 +\20 3.2% 65.8 33.5 34.7 Share buyback Cash dividend 45.6 17.0 28.6 FY2014 90.8 50% \3,735 39.1 \130 \90 \110 +\10 10.0 24.7 FY2013 \60 32.3 FY2015 132.0 50% \3,188 \70 1.9% \80 2.5% 35.4 FY2016 183.2 50% \4,079 42.2 FY2017 162.7 50% \4,282 48.4*2 2.3% 2.2% 2.6% Interim*2 \65 FY2018 (Forecast) 105.0 - - FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 (Forecast) Adjusted consolidated profit Total payout ratio*4 (Reference) Share price (End of fiscal year) 15.8 220% \2,652 Plan to consider flexibly total payout ratio of FY2018 depending on the situation ★November 2018: In light of voices of the market, decided to cancel all treasury stocks (equivalent to 10.12%) Shareholder return policy Aim at attractive shareholder return through stable dividend and flexible share buyback, taking into account relative level of 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 dividend yield, etc. 7 *1 Total shareholder return yield = (Cash dividend + Share buyback) / Market cap. as of end of FY *2 The Interim dividend is \24.2 billion (DPS \65) (approved) *3 Dividend yield = Cash dividend / Market cap. as of end of FY *4 Total payout ratio = (Cash dividend + Share buyback) / Adjusted consolidated profit 0:03:40.9 1. Group management Progress of Mid-term Management Plan (4) - Achievements of First Half of Mid-term Management Plan ? Executed strategies related to main missions in initial plan and achieved a lot of fruitful results. Main missions in initial plan Typical achievements ? Optimized distribution channel ? Allied strategically with innovative players targeting the creation of new business ? Enhanced efficiency with AI, etc. models and sources of earnings ? Achieved dramatic growth in profit through the acquisition of former Endurance, and develop and optimize the overseas portfolio through the sale of Canopius ? SI evolved into a global platform Domestic P&C Achieve higher operating efficiency at global top level Overseas Insurance Organic growth and accelerate growth with M&A Domestic life Nursingcare and healthcare, Challenge to integrate product, service and channel, expand policies in force ? Expanded policies in force centered on highly profitable medical insurance ? Developed epoch-making “Insurhealth ” product such as new income compensation insurance and dementia insurance ? Become profitable while enhancing quality and efficiency as well as improving occupation rate ? Built eco-system of dementia as the center, and create group synergy Stabilize profit by enhancing quality and efficiency etc. Enhance competitive advantage through strengthening customer contact with advanced technology, etc. ? Built a digital trilateral structure ? Promoted existing business reshape and new business through strategic alliances, etc. Digital, etc. 8 0:06:24.8 1. Group management Direction of Mid-term Strategy (1) - Group Qualitative Evolution (Transformation) ? Seek to achieve the Group’s qualitative evolution in order to continuously attain an ROE above the cost of capital as well as EPS growth. ? Strive to optimize the Group portfolio by allocating capital with an emphasis on profitability, reflecting enhanced use of return on risk (ROR), etc. Qualitative evolution to aim for Toward long term growth cycle Overwhelming qualitative evolution + Optimize portfolio Holding company Aiming to maximize group synergy, lead building eco-system and accelerate digital and data utilization, etc. Domestic P&C Evolve and diversify customer contact in light of social change Overseas Emphasize on profitability Evolve business portfolio and accelerate to revamp assets, products and services in light of profitability Growth investment Consider disciplined M&A and strategic alliance contributing to qualitative evolution, etc. FY2020 Build unique and uncommon global platform (=SI) Domestic life Accelerate growth through “Insurhealth” promotion Nursing care and healthcare + Enhance shareholder return Expand earning base in senior market leveraging nursing care as a gateway FY2018 9 0:09:57.1 1. Group management Direction of Mid-term Strategy (2) - Direction of Business and Strategy, and Steady Growth ? Aim to complete qualitative evolution in each business to achieve sustainable growth of the Group. Direction of business and strategy Domestic P&C Maintain and expand capability in generating cash flow mainly through streamlining Optimize distribution channels, use AI and IT system renewal, etc. cost cost Overseas insurance Driver for growth of group profit Accelerate organic growth worldwide through Utilizing global platform including retail Reshape product portfolio including pricing Create new source of earnings through collaboration and digital Group common initiatives ・Accelerate building eco-system as well as collaborating among businesses ・Evolve existing business and create new business through open-innovation-oriented digital technology Disciplined M&A, aiming for optimizing portfolio Domestic life Steady growth of profit Accelerate Insurhealth (Integrate health support and insurance) Higher efficiency mainly through use of AI and RPA Nursing care and healthcare, etc. Expand and stabilize profit, create group synergy Improve profitability through efficient Management with high quality Develop new product and service leveraging dementia Create new source of earnings in senior market cost 10 0:11:36.9 1. Group management (Reference) Group Common Initiatives Example: Initiatives to create group synergy linked with each business Built eco-system centered on dementia prevention, and provide seamless services of the Group at each life stage Going forward, aim for building a lot of eco-system and expanding group synergy Dementia support “SOMPO smile club”*1 Group Apply for insurance Services to detect dementia Group prevent its progression Services to Nursing Home-care and care in care facility with high quality MCI *2 certified Claims paid Dementia Claims paid “dementia insurance”*1 Domestic life “nursing care Domestic P&C insurance”*1 Achieve earnings growth centered on nursing care and life insurance through seamless service. Also aim to enhance the SOMPO brand by solving social issues in Japan *1 Launched in October 2018 *2 Mild cognitive impairment Accelerate digital strategy Tokyo Silicon vallley × × Israel Absorb technology and know-how through expanding external partners Utilize in business, Build eco-system Evolve existing business and accelerate creating new business model (Digital transformation) <So far> Strategic investment ・Built digital trilateral structure ・Materialized many projects enhancing efficiency and customer contact (17 cases)*3 <Going forward> ・Strategic investment for acquiring further external partners and expertise ・Aim to accelerate evolution of existing business through open innovation as well as to build a lot of new business models and eco-system 11 *3 PoC 60 cases 0:13:41.3 1. Group management Direction of Mid-term Strategy (3) - Robust Financial Base and Capital Allocation ? Maintain and enhance a robust financial base under strict risk controls as a solid foundation for strategies. ? Based on proper balance sheet management, aim for maintaining both attractive shareholder return and disciplined growth investment. Financial base and risk control Plan to maintain and enhance robust financial soundness mainly through accumulating profit and reducing strategic holding stocks 232% 250% Target capital level Capital allocation (1) Direction of shareholder return ●While growth of group profit, aim to enhance shareholder return ・Basically stable dividend ・Aim at increasing trend with profit expansion In case constantly exceed ・Enhance shareholder returns mainly by share buy-back ・Consider additional risk-take (investments in growth fields) and others In case constantly fall below ・Execute a variety of measures to reduce risks ・Consider enhancing capital buffer by hybrid bond issuance, etc. ・Retain more earnings and others Dividend Share buyback ・Dynamically execute transactions as a means of adjusting capital, taking into account the stock price level 180% Capital allocation (2) Direction of growth investment Continue strictly disciplined manner, plan to capture global investment chance contributing to achieving higher ROE selectivity. ・Major M&A mainly professional team consider cases contributing to profit expansion and higher ROE ESR (end of September 2018) Mid-term direction → Evolve strategic risk management (ERM) further Optimize group portfolio by enhancing use of ROR, etc. Adjusted capital ↓ Risk amount Expect to expand gradually centered on earnings accumulation CAT risk on group wide Proper underwriting discipline and control by reinsurance cover Risk of change in stock price Reduce strategic holding stocks in plan Overseas M&A (Insurance company) ・Bolt-on type M&A Mainly SI consider with specific intension such as diversification of geography and lines Strategic alliance ・Build eco-system with external partners ・Based on customer needs, develop new (worldwide) services, etc. Arrows indicate future direction 12 0:15:02.3 1. Group management Business Portfolio Transformation ? Progress risk diversification of entire group, aim to achieve well-balanced business portfolio. Vision of optimizing business portfolio Domestic P&C Overseas Insurance Domestic Life Nursing care & healthcare, etc. FY2010*1 FY2017 When achieve vision (Rough estimate) Overseas weight: around 40% Overseas weight: 27% Around Adjusted 40% consolidated profit Overseas weight: 7% 0% 7% 3% 27% Adjusted consolidated profit \162.7 bn. Adjusted consolidated ROE 6.4% 52% \300.0 bn. level Adjusted consolidated ROE over 10% Around 4% Around 15% Around 40% Adjusted 27% consolidated profit \29.6 bn.*2 66% 18% Domestic weight: around 60% Domestic weight: 73% Domestic weight: 93% *1 FY of SOMPO holdings establishment *2 Estimation based on current definition of adjusted profit 13 0:15:06.9 1. Group management Progress of Group management and direction of mid-term strategy - Progress of mid-term management plan - Direction of mid-term strategy - Business portfolio transformation 2. Businesses Domestic P&C insurance Overseas insurance Domestic life insurance Nursing care & healthcare, etc. 3. Reference 14 0:15:11.0 Domestic P&C Domestic life Overseas Nursing care & healthcare, etc. Progress of Domestic P&C Insurance ? Aim at further profit growth and stability in preparation for future environmental changes by achieving qualitative evolution and higher operating efficiency through upfront investments such as AI, RPA and IT system and reform of the product portfolio through optimizing premium rates thoroughly. Plan for adjusted profit Adjusted consolidated profit (Billions of yen) Net premiums written (Sompo Japan Nipponkoa)*3 Adjusted consolidated profit*1 (after adjustment of domestic natural disasters) (Billions of yen) Assume CAGR of about +1% While enhance efficiency, etc. there were effects of upfront investments contributing to qualitative evolution further and auto insurance rate revision -16% 137.7 140.5 Aim at higher profitability mainly by streamlining drastically 2,162.5 2,121.7 2,132.8 2,134.0 116.0 91.9 111.9 134.9 85.3 1H actual 1,093.4 14.0 FY2015 FY2016 FY2017 FY2018*2 (forecast) FY2020 (Vision) FY2015 FY2016 FY2017 FY2018 (forecast) FY2020 (Vision) *1 Revised adjusted consolidated profit, assuming an incurred loss on domestic natural disasters of \48.0 billion (equivalent to the historical average and estimated amount in initial forecasts for FY2018) *2 1H actual in FY2018 is -19.4 billion yen *3 Presented by adjusting reinsurance policies scheduled for successive transfer to overseas subsidiaries: Deducting the portion of the total transfer amount (approx. \60.0 billion) that has yet to be transferred in each fiscal year. 15 0:15:55.3 Domestic P&C Domestic life Overseas Nursing care & healthcare, etc. Key Points for Domestic P&C Insurance ? Aim to improve profitability of insurance products, to pursue efficiency and to achieve qualitative evolution capturing change in customer needs. (1) Combined ratio*1 Aim at 92% to 94% level of combined ratio by higher efficiency mainly through digital technology and optimization distribution channels, and control of CAT risks, etc. <Combined ratio after adjustment*2 of domestic natural disasters> (2) Growth strategy Progress collaboration with innovative players, etc. aiming for continuous expansion of the number of customers <Examples of recent alliances> (3) Direct business (Saison Automobile & Fire) ・Mainly due to differentiated product, No.1 growth rate in the industry ・Come within the range of profitable in FY2020 <Policies in force of direct auto insurance> (10 thousands) 95.6% 92.7% 93.4% 94.9% 94.0% 1H actual “LINE insurance” launched (October 2018) Maintain 92% to 94% level ・Insurance that users can take out easily and flexibly through the LINE messaging app with selectable term periods starting from one day ・Extending our reach to LINE’s 76 million users and young customers in Japan ・Increase the number of customers by further enhancing products going forward Include positive impact (+150 thousands) of Sonpo 24 which will be merged in July 2019 +17% Around 120 FY2015 FY2016 FY2017 FY2018 (forecast) after FY2020 72 85 1H 実績 actual 75 75 *1 Sompo Japan Nipponkoa (excl. CALI, household earthquake) *2 Revised number, assuming an net claims paid of \43.0 billion on domestic natural disasters (equivalent to the historical average and estimated amount in initial forecasts for FY2018) Business alliance with ZhongAn international*3 in area of insurance and technology Mainly provide cyber security and consulting services FY2017 FY2018 (forecast) FY2020 (Vision) *3 ZhongAn insurance’s strategic subsidiary 16 0:16:23.9 Domestic P&C Domestic life Overseas Nursing care & healthcare, etc. Progress of Overseas Insurance ? Partly due to consolidation of SI (former Endurance) in March 2017, profit expanded drastically. ? Position SI as SOMPO global platform, aim at expanding weight of overseas insurance business further. Plan for adjusted profit (Billions of yen) Premiums* (Billions of yen) Mainly due to a start of profit consolidation of SI, accelerate expansion of overseas insurance Mainly due to steady organic growth, aim at further expansion Assume CAGR of about +30% +189% 54.0 +222% 44.0 515.4 538.7 18.7 19.9 1H actual 218.5 167.1 1H actual 27.1 321.5 FY2015 FY2016 FY2017 FY2018 (forecast) FY2020 (Vision) FY2015 FY2016 FY2017 FY2018 (forecast) FY2020 (Vision) * Deduct the portion of Sompo Canopius due to sales completion. Premiums reflect holding shares. This treatment does not coincide with financial statements. 17 0:16:35.0 Domestic P&C Domestic life Overseas Nursing care & healthcare, etc. Key Points for Overseas Development ? Manage both acceleration of organic growth mainly through SI evolution into a global platform and disciplined M&As. (1) Evolution into a global platform (accelerate organic growth) Accelerate global expansion of specialty lines, etc. leveraging SOMPO licenses of 30 countries mid-term SI growth target (Net written premium) CAGR:+10%~15% + Retail (3) Major M&A strategy With strict disciplined manner, consider selectively Corporate Utilize licenses ・Accelerate expansion including Japan centered on specialty lines Developed countries Mainly corporate Main point of view enhancing risk diversification and group capital efficiency Emerging countries Mainly retail Enhance sales capability ・Accelerate GRS (global risk solution) ・Continue to hire underwriters Diversification of geography and products ・Aim to finish building a global platform by the end of FY2020 ・Plan and execute global auto insurance strategy including digital technology × ・Expand globally professional indemnity, etc. <Som Pro> ・Expand globally crop insurance <AgriSompo> Main point of view expanding market share and future growth <Number of staffs in business on the ground (head)> Continue to increase centered on underwriters <Candidate on current environment> (2) bolt-on type M&As Continue to consider bolt-on type M&A contributing to diversification of geography and products toward risk diversification and further growth. March 2018 June 2018 A&A (Italy: broker of crop insurance) Lexon (U.S.: surety insurance company) 375 FY2015 479 570 720 Insurance on the ground which can grow stably ( specialty, etc.) Countries with certain level of know-how and high growth FY2016 FY2017 FY2018 (plan) 18 0:18:19.9 Domestic P&C Domestic life Overseas Nursing care & healthcare, etc. Progress of Domestic Life Insurance ? In light of steady expansion of policies in force, achieve growth of profit. ? Aim at further growth by accelerating epoch-making products and services with health support function. Plan for adjusted profit (Billions of yen) Premium and other income (Billions of yen) Assume CAGR of about +5% Policies in force expand steadily by providing new products timely centered on medical insurance +5% Accelerate Insurhealth promotion, aim at steady growth 396.4 419.5 438.4 452.0 30.4 29.1 29.2 32.0 1H actual 14.7 1H actual 17.7 1H actual 216.0 FY2015 FY2016 FY2017 FY2018 (forecast) FY2020 (Vision) FY2015 FY2016 FY2017 FY2018 (forecast) FY2020 (Vision) 19 0:18:33.7 Domestic P&C Domestic life Overseas Nursing care & healthcare, etc. Key Points for Domestic Life Insurance ? Aim at growth by launch of new products and services as well as evolution into a health support enterprise for customers. (1) Evolve into a health support enterprise Aim at doubling number of customers in conjunction with providing new added values integrating health support function for customers and insurance (2) Annualized premium in force Mainly by providing new product at proper timing, expand policies in force centered on protect-type product <Annualized premium in force since FY2010> (3) Product mix (policies in force) Evolve into a product mix mainly with highly profitable products Saving-type products 25% Insurhealth <October 2018 launch> (Billions of yen) CAGR +5% Increasing Term life term life, (Income etc. compensation Whole life 5% , etc.) 21% 15% Insurance function Industry first + Healthcare function Cover MCI (Mild cognitive impairment) 332.8 275.8 357.6 370.4 373.5 Others 9% Total 4.09 million at the 1Q end of 実績 3,611 September 2018 Medical 50% <April 2018 launch> Industry first Healthcare Challenge scheme*1 + Discontinuous productivity enhancements (With digital technologies such as RPA and AI) FY2010 ・・・・ FY2015 Protection-type products*2 74% FY2016 FY2017 FY2018 1H *1 If a policyholder improves health condition by meeting certain conditions after policy enrollment, premiums are reduced and the difference between the former and reduced premiums are reimbursed retroactively, going back to the policy enrollment date. *2 Mainly medical, cancer, income compensation, and term life insurance (excluding long term life insurance, etc.) 20 0:19:45.5 Domestic P&C Domestic life Overseas Nursing care & healthcare, etc. Progress of Nursing Care & Healthcare, etc. ? After entered into nursing care business, achieved to become profitable and realized steady growth of profit. ? Aim to increase the presence of the nursing care business in the business portfolio over the med term, mainly by further enhancement occupancy rates and cost reductions. Plan for adjusted profit Nursing care & healthcare Asset management, etc. Occupancy rate*2 End of FY2018 (Forecast) End of 1H FY2018 (Billions of yen) Nursing care business became profitable mainly due to improving occupancy rate 95% Aim at achieving improvement of occupancy rate further and reducing cost, etc. 90.8% 89.6% 90% +233% 85% 5.0 4.1 80% 1.5 -0.7 ※1 3.8 3.8 3.0 75% -0.1 -2.3 April 2015 April 2016 April 2017 April 2018 FY2015 FY2016 FY2017 FY2018 (Forecast) FY2020 (Vision) *2 integrate occupancy rate of former SOMPO Care and SOMPO Care Next *1 1H actual inFY2018 is \2.8 billion 21 0:20:08.3 Domestic P&C Domestic life Overseas Nursing care & healthcare, etc. Key Points for Nursing Care Business ? Mainly by enhancing profitability on a stand-alone basis further as well as evolving services related to dementia, accelerate profit contribution. (1) Enhance stand-alone profitability further While continue to improve occupancy rate, achieve higher efficiency further with digital and strive to secure human resources by enhancing remuneration, in an effort to further improve standalone profitability <Initiatives to improve stand-alone basis profitability> (2) Growth leveraging dementia Evolve services related to dementia connecting insurance to nursing care, aiming at expanding profit contribution to group (3) Expand into a senior market By utilizing know-how, VOC and VOG*as much as possible, enter into new business surrounding nursing care in the future. <Collaboration among businesses from dementia axis> <Future direction (vision)> Leveraging existing nursing care business, expand into surrounding area which can be monetized Higher efficiency ? ? + Secure and maintain human resources ? ? Optimize personnel assignment Achieve drastic higher efficiency with introduction of advanced technology Review HQ function after integration Secure and maintain high quality human resources mainly through enhancing remuneration * Mainly by decrease in turn over rate, reduce recruitment cost Develop services related to dementia Insurance Project of “dementia” Business for active senior Nursing care ・Expand group profit ・Increase presence in senior market Existing business (covering nursing care insurance) Nursing care business (not covering insurance) * Real voice of more than 100 thousand users, residents and staffs 22 1. Group management Progress of Group management and direction of mid-term strategy - Progress of mid-term management plan - Direction of mid-term strategy - Business portfolio transformation 2. Businesses Domestic P&C insurance Overseas insurance Domestic life insurance Nursing care & healthcare, etc. 3. Reference 23 Reference Group Asset Management ? No change in plans to undertake stable asset management, taking liquidity, safety and so on into consideration. ? Continue to aim at reducing strategic-holding stocks as planned and enhancing yield based on asset management diversification, etc. Balance of group investment assets*1 and asset management policy Reduction of strategicholding stocks Plan to reduce total exposure, while watching economic rationality (ROR of individual stocks, etc.) and purpose of holding Reference (1) Balance on book value (Billions of yen) Reduce up to one third level (Against FY2000) Domestic stocks 1.6 Others 0.4 Measures against low interest rate environment While watching quality of assets and risk diversification, utilize credit investment, etc. Government bonds 2.8 Domestic bonds 3.9 -61% 1,241.2 846.0 ・・・ FY2000 FY2010 About -25% Deposits, etc. 0.9 From the perspective of return on reinvestment yield*2 Assuming current market environment, aim at 1.5% to 2.0% level 478.0 ・・・ FY2017 → ・・・ FY2020 (Plan) Total \10.6 tn. Corporate and municipal bonds 1.0 Reference (2) Balance on fair value (Billions of yen) → 0.6 Reduce around \100.0 bin. annually Loans -30% 2,387.5 1,163.0 1,661.4 Foreign securities 2.9 Arrows indicates direction of asset allocation. *1 End of 1H FY2018, group-wide basis (Trillions of yen) ・・・ FY2000 FY2010 ・・・ FY2017 ・・・ FY2020 (Plan) *2 Sompo Japan Nipponkoa general account and yen-interest assets, etc. as object 24 Reference Penetration and Progress of ERM Management ? Penetrate ERM process, aim at further evolution to enhance the Group. Penetrate ERM into group Penetrate ERM in the organization as a management process for increasing corporate value, while achieving a balance between capital, risks, and returns * SOMPO group ERM evaluation by S&P global: Raised to “Strong” (April 2018) Evolve ERM further Aim at sophistication further by deepening ERM and strengthening global ERM framework, etc. < Specific areas to focus on> Evolve ERM ? Deepen management decision related to various strategy with ERM *Optimize global CAT structure (including reinsurance cover), etc. Utilize strategic risk management(ERM) ・Utilize product development, management and reinsurance, etc. to achieve higher profitability ・Utilize widely in management decision of M&A and selection of sale of strategic holding stocks, etc. Sophisticate risk control ・Sophisticate the ERM framework and various management approaches, taking into account growth of the overseas insurance business ・Develop risk models for the nursing care business, in addition to controlling risks pertaining to traditional insurance businesses Sophisticate risk control further ? Evolve risk model continuously corresponding to change in external environment ? Identify and quantify potential risks that could materialize in the future Penetrate risk culture ・Penetrate ERM culture by the messages to all staffs and training, etc. Penetrate risk culture further ? Penetrate ERM culture to all staffs further, and accelerate use of ERM in each department 25 Reference Enhance Corporate Value Through Advanced Initiatives for ESG ? Continue to tackle the challenge of solving social issues through businesses, aim to achieve sustainable cycle of enhancing corporate value. *1 ESG incorporated in the businesses E ? ? ? ? Direction in the mid-term ? Based on strong Governance, achieve solid cycle of sustainable growth by strengthening initiatives related to Environment and Social Enhance ESG disclosure further including climate change S *1 Identify and mark the main United Nations’ Sustainable Development Goals (SDGs) that correspond to SOMPO’s initiatives ? ? Wide variety of insurance products match with customer’s demand Promote micro insurance (India) Improve and develop loss prevention services Develop insurance and services contributing to nursing care prevention and health support Provide high quality nursing care service Set up eco-funds (Sompo Japan Nipponkoa Asset Management) ? *1 Human resource and Management supporting ESG ? Continuous promotion of diversity Human resource development/ productivity enhancement ? (continuously selected in Certified Health & Productivity Management Outstanding Organizations Recognition Program by METI) ? Obtained international standard that specifies requirements for an effective environment system (ISO14001) Governance system supporting ESG G Compensation for officers linked to corporate business performance 7 individuals among the 17 Directors and Audit & Supervisory Board members are outside officers The Nomination and Compensation Committee is chaired by an outside director. *1 E S G ? ? ? Inclusion in Socially Responsible Investment (SRI) indexes and other indexes ? ? Selected for inclusion in the Dow Jones Sustainability Index for 19 consecutive years (longest-running record for a Japanese company). Adopted by all ESG indexes selected by the Government Pension Investment Fund (GPIF) Selected for inclusion in the highest rank of the CDP*2 for second consecutive years. 26 *2 International project on climate change strategy, etc. (Carbon Disclosure Project) Reference Stock Price (Total Shareholder Return) ? Since announced mid-term management plan on 26 May 2016, our stock price has progressed steadily. Progress of stock price and market capitalization (from 26 May 2016 to 31 October 2018) Our price TOPIX TOPIX Sector Index (Insurance) *Indexed with the stock price on 26 May 2016 set as 100 (left axis). 170 160 150 140 130 120 110 100 90 80 26 May 2016 3 +9.4% +7.3 % 3 兆 + 34.0% 180 Our market capitalization (right axis) 2 (Trillion yen) 2 1 End of November End of May 2017 End of November End of May 2018 * Stock price above shows total shareholder return (ratio of return after reinvestment of dividends before tax) 27 Reference Numerical Management Targets, etc. Numerical management targets FY2017 (Billions of yen) (Actual) (1H Actual) FY2018 (Forecasts) Announced November 2018 Definition of adjusted profit 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 Overseas insurance Domestic life insurance Nursing care & healthcare, etc. 85.3 44.0 29.2 4.1 162.7 6.4% 139.8 7.6% -19.4 27.1 17.7 2.8 28.3 22.1 - 14.0 54.0 32.0 5.0 105.0 4.0% 170.0 8.8% Overseas insurance Net income (including major non-consolidated subsidiaries) Adjusted profit of SI is operating income*3 Domestic life insurance 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) Total (Adjusted consolidated profit) Adjusted consolidated ROE*2 Consolidated net income (J-GAAP) ROE (J-GAAP) Nursing care & healthcare, etc. Net income *1 Total of Sompo Japan Nipponkoa, Saison Automobile & Fire, Sonpo 24, Sompo Japan Nipponkoa Insurance Services, DC Securities and Sompo Risk Management (former Sompo Risk Management & Healthcare) *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 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.). Actual for the overseas insurance business in FY2017 includes a decrease in tax expenses in connection with the reorganization of SI. 28 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 E-Mail URL : : : +81-3-3349-3913 ir@sompo-hd.com https://www.sompo-hd.com/en/ 0:21:24.5 0:21:49.4 0:33:21.7 0:43:00.1 0:53:44.6 0:58:33.5 1:04:54.3 1:09:03.0 Kengo Sakurada President(Group CEO)