CEO's Letter

To Protect Our Customers and Society in Times of Need

Satoru Komiya
President and Group CEO

Tokio Marine Group Purpose

Since Tokio Marineʼs founding in 1879, our unwavering purpose has remained: “To protect customers and society in times of need.”
Our company found its beginnings in marine insurance 144 years ago. Since then, Japan has experienced many difficult periods and dramatic societal changes, such as the Great Kanto Earthquake, defeat in war, and the advance of motorization. Yet with our purpose, “To protect customers and society in times of need,” as our foundation throughout our history, we have confronted societal challenges through our core insurance business and strived to provide solutions. It could be said that all of our business activities contribute to addressing societal challenges. Our employees work under the premise of “The more Tokio Marine grows, the better for society.” As a result, we are confident in our continued ability to achieve sustained profit, while providing value to all our stakeholders, including customers, society, shareholders, and our employees.
In 2021, we clearly defined the next generations as an addition to the above stakeholders, based on the strong belief that we have a responsibility to pass on our shared natural environment to the next generation in a sustainable state. Of course, it is not an easy task to continuously provide value to all stakeholders. But the optimal solution is always there, waiting to be found.
With this conviction, and our unwavering purpose in mind, we will continue working towards a sustainable society while addressing ever-more complex societal challenges. As a result, we will achieve growth for the Company and continue to provide value to all our stakeholders.

Business Environment Awareness

Today, 144 years since our founding, we have grown into a global company, and more than half of Group profits originate from overseas operations. For us, the issues occurring today̶wherever in the world̶are not simply someone elseʼs problems. Natural catastrophes are intensifying alongside climate change. The war in Ukraine has been prolonged, further rupturing our world. Under the situation, the global supply chain continues to be reconfigured and economic security is reassessed, all at tremendous speeds. Against this backdrop, inflation is rising rapidly around the globe. The bankruptcy of some U.S. financial institutions demonstrates the tightening of monetary policy, and there is increased risk of an economic downturn. VUCA is deepening across all fields, including political, economic, and social, making it harder to outlook the future in a few weeksʼ time , let alone months.
Within this business environment, and in contrast to fiscal 2021, when we posted record profits, fiscal 2022 was affected by temporary factors such as natural catastrophes including typhoons and hurricanes, and COVID-19. These had a negative impact of 173.1 billion yen, a 23% year-on-year drop, and we finished at 444 billion yen. However, insurance exists to support customers in times of need. To this end, we look at fiscal 2022 as a year when we faced many moments of truth. In those moments, we demonstrated the value of our existence.
Through these experiences, we believe without a doubt that we will bounce back even stronger moving forward.
In fact, net premiums written, one of the benchmarks of client confidence in our business, saw a year-on-year increase of 15%, rising to 4.4 trillion yen despite the pandemic. Also, our normalized base profit, which excludes one-time factors, saw a year-on-year increase of 22%, rising to 617.1 billion yen. This past year gives us confidence that our underlying capabilities are stronger and will continue to be stronger as we evolve and grow.

FY2022 Performance

Net Premiums Written 2021:3.8trillions of JPY +15% 2022:4.4trillions of JPY Adjusted Net Profit (normalized basis*) 2021:505.4billions of JPY +22% 2022:617.1billions of JPY
  • *Natural catastrophes are normalized to an average annual level. Excluded in 2021 are the impact of COVID-19; capital gains in North America, etc.; and capital gains from sale of business-related equities (for part of sale exceeding 100 billion yen). In addition, 2022 excludes the war in Ukraine and South African floods.

How Tokio Marine Fulfills Its Purpose, Even in Times of VUCA

Tokio Marine Groupʼs Approach to Value Creation: Global Risk Diversification and Global Integrated Group Management

Taking risks is a core business of Tokio Marine. We start with the premise that something will occur somewhere on the globe, and then, by managing those risks, we ensure sound business. It is our imperative in running our business that no matter the circumstances, we always keep our promises to our customers.
To achieve our goals at a high standard, it is very important to diversify risk across the globe. Global risk diversification, the strong foundation that supports Tokyo Marineʼs stable management and growth, cannot be built overnight. Over these past 15 years, we have allocated capital gained from the sale of business-related equities to M&A, thereby increasing overseas insurance risk that has a low correlation with Japanese non-life risk. This approach has brought profit growth while curbing risk growth.
Our large acquisitions began with Kiln in the United Kingdom back in March 2008, followed by Philadelphia Insurance (PHLY) in the United States (December 2008), Delphi (DFG) (May 2012), HCC (October 2015), and Pure (February 2020). Simultaneously, we aggressively invested in emerging markets and pursued bolt-on acquisition to bolster our existing businesses. On the other hand, we have identified and divested certain businesses with a forward-looking view to optimize the business portfolio.
Even in years when we saw large-scale natural catastrophes and the COVID-19 pandemic, our global risk diversification has helped to keep the bottom-line impact to under 30%̶although we are not yet satisfied with this level. Calculated diversification effect currently stands at 47%, and we aim to implement more initiatives that further diversify our risk profile.

In addition, we have built and are steadily evolving our unique strength of global Integrated Group Management.
Through M&As, we have acquired very “Good Companies” that fit with our corporate culture and continue to grow. Yet for Tokio Marine, our greatest achievement is welcoming talent with great expertise and knowledge. Social challenges and risks, including climate change and healthcare, continue to grow and become more complex around the world. At Tokio Marine, we intend to accurately identify these challenges, create solutions, and manage the risks. We will also balance growth and governance to a high degree. Such capabilities are required now, and we will assign appropriate talent in areas where they can address challenges and exercise our collective global expertise. This is a powerful form of corporate diversity, and it enables us to improve the quality, accuracy, and speed of our management decision-making.
We are in our eighth year of global Integrated Group Management, and by increasing the number of non-Japanese executive officers and appointing deputy CxOs, we continue to evolve. We are also seeing results reflected in quantitative terms. For example, we now offer our Japanese clients insurance products that leverage the expertise of HCC (currently TMHCC) and Kiln (currently TMK) based in the United States and in Europe. We have earned higher investment returns by allocating Group assets to U.S.-based Delphi (DFG), which has industry-leading expertise in asset management. These Group level synergy discussions are happening organically among Group Company and the synergy effect is now valued at $470 million, increasing the unique value of the Group.

Now, it is important to firmly address societal challenges, such as climate change, disaster resilience, and healthcare, by leveraging our strengths in global risk diversification and global Integrated Group Management. In doing so, our local entities in 47 countries and regions throughout the world, including Japan, will benefit from the unwavering trust of our local stakeholders.
The harder we work, the more Tokio Marine can give to our world and people. This, in turn, will allow us to realize a sustainable society more effectively, and ultimately, we too will grow in a more sustainable way. In my introduction, I touched on our purpose, and we will continue to spread the foundational initiatives rooted in our purpose across the entire Group throughout the globe.
Naturally, it goes without saying that upgrading our own capabilities is essential if we are to address new social challenges. With our purpose as our foundation, we will bolster internal capital, which includes human and intellectual capital, as well as collaborate with external partners (social capital), and create a cycle of business activities and solutions to societal challenges. This is how we will steadily refine our strengths and strategies and galvanize our problem-solving capabilities. We continue to place importance on this approach, and it is our endless challenge to continue this cycle.
We already have a number of initiatives running to bolster internal capital, namely promoting and instilling diversity and inclusion and leveraging interactive AI. Our officers (CHRO on human capital, CDO on intellectual capital) will introduce these themes in more detail, so I would like to highlight just one point. I would like to introduce our latest human capital initiative, the TLI (Tokio Marine Group Leadership Institute), and this is not just because I have a long career background in HR. The TLI, established in April 2023, is a program that aims to continuously and globally nurture group-level management leaders with a deep understanding of Tokio Marine Groupʼs purpose. There are three core points. First, fully leverage the Japanese and global talent data collected thus far, and sophisticatedly link the TLI with our talent management framework. Second, management teams in Japan and abroad are committed to passing down their vision and experiences directly to the next generation, that is, passing on the baton of our spirit̶our purpose̶which lives on in Tokio Marine Group. Third, gather the global wisdom of talent development of Group Company HR sections and collaborate to foster our prospective leaders on a global scale. As we go forward, we will position the TLI at the center of group-level management leader development to build our own systematic program.
Regarding collaborative creation with our external partners and in terms of disaster resilience, development of comprehensive disaster prevention and mitigation solutions will finally start in Japan this summer. This is led by CORE, a disaster prevention consortium which transcends industry boundaries. By combining the strengths, data, and know-how of participating companies, our aim is to provide end-to-end solutions for the value chain in the disaster prevention and mitigation fields. These span from ascertaining the current situation in disaster-affected areas to rebuilding daily lives, including the use of insurance. In the United States, and in tandem with the University of Hawaii, we are exploring ways to mitigate risk for deteriorating condominiums. In China, we set up a health consortium to develop cross-industry healthcare solutions that extend the healthy life expectancy of Chinese citizens. These seeds are only just sprouting, but they will grow into trees and eventually a forest. It is very encouraging to see these initiatives accelerate, not only in Japan but also around the world. I believe that the continuation of these efforts, including the strengthening of internal capital, will be the engine that propels Tokio Marineʼs sustainable growth for the next 100 years.

Tokio Marine Group’s Approach to Value Creation

Steadily Moving toward the Realization of the Society and the Group We Envision

As a result of carrying out our strategies, for fiscal 2023, we forecast adjusted net income of 670 billion yen and adjusted ROE of 17.1%. Fiscal 2023 is the final year of our current Mid-Term Business Plan, and we expect to finish significantly higher than what we set out in the initial plan (adjusted net income of approximately 480 to 540 billion yen and adjusted ROE of approximately 12%). We believe that the numbers prove our capabilities, and they are steadily increasing.
As I have explained on various other occasions, we believe that business profit growth and shareholder returns should be consistent. With that in mind, we set the fiscal 2022 regular dividend at 100 yen per share, as planned at the beginning of the year. For the fiscal 2023 regular dividend, we intend to increase it by 21 yen from the previous year to 121 yen, and raise our dividend payout ratio to 50%. This represents twelfth consecutive year of a dividend increase.
This 670 billion yen profit plan for fiscal 2023 would be record high profit, but our management acknowledges that it is only a checkpoint̶a milestone in our journey to fulfill our vision to achieve a sustainable society where everyone can live safely and securely, and embrace challenges, and a milestone in our journey to fulfill our purpose or long-term goal to be a global insurance group with sustainable growth by providing safety and security to customers around the world.
So, the question is, just how much will our profits grow? Currently, we are working to announce in May 2024, our next Mid-Term Business Plan (FY2024‒2026). With an even longer perspective, following three points have been determined:

  • 1.Continue to achieve world-class EPS growth (currently at approx. +5‒7%) through organic growth
  • 2.Raise ROE to be on a par with European and American peers, and expand equity spread
  • 3.Increase shareholder returns as a result of the above

Of course, it goes without saying that in achieving these financial targets, it is also essential to achieve our non-financial targets, including the reduction of greenhouse gas emissions and a higher representation of female directors and auditors. As such, we have set non-financial KPIs to address the social challenges that the Company faces for our own sustainable growth. For example, climate change. As highlighted in the TCFD section (pp. 72‒85), climate change will lead to larger and more frequent natural disasters, which could seriously impact claims payment and business continuity. Accordingly, our own initiatives for carbon neutral are a major premise for Tokio Marine. As a responsible insurance company, institutional investor, and global corporation, we actively engage with customers in their effort to transition towards zero carbon society, with the goal to have insurance clients and investees achieve net zero by fiscal 2050.

The Tokio Marine Group’s Future Vision

In Closing

In closing, allow me to reiterate my commitment as the CEO of Tokio Marine Group.
Once again, I would like to express my heartfelt gratitude to all of our shareholders and investors for the support which makes it possible for Tokio Marine to continue our business activities̶thank you. As mentioned earlier, this is a once-in-a-hundred-year tipping point, rocked by uncertainty in global affairs and facing large-scale managerial and business environment changes. Our business is no exception. In the face of these issues, we need to act as pioneers, proactively taking action to create the future, rather than simply responding to changes. We often host meetings where we discuss serious issues in a relaxed environment with the aim of reiterating our purpose and culture̶we call this “Majikirakai.” Here, I often address our employees with the following ideas: “Think deeply and challenge what you can change in your day-to-day work. What can you leave for your successors and the next generation?; What can you do to reach out and connect with the future?” and “Tokio Marine must become a company that values those who get five hits in 20 at bats with a batting average of .250, rather than two hits in three at bats and a batting average of .666. Instead of setting a limit for yourself, I want you to go up to the batterʼs box and swing as many times as you can.”
A young employee in his 30s turned his attention to a niche market, which was not easy to access for Tokio Marine & Nichido. With the aim of creating alliances across various business partners to provide tailored insurance products and services, we created Tokio Marine X Small-Amount Short-Term Insurance Co. Ltd. The company is an example of “standing in the batterʼs box and swinging the bat” and exemplifies our determination to “keep swinging.” In a digitally centered niche market, it is important to quickly learn and move forward through repeated trial and error. Therefore, we chose small-amount, short-term insurance for the company, as it combines life and non-life insurance and facilitates agile product development.
Small-amount, short-term insurance is subject to a maximum handling of 5 billion yen in insurance premiums. From a Group-wide perspective, the impact of this new business is small. Nonetheless, as long as it is aligned with our purpose, I want to acknowledge our employees to challenge. The team is very diverse and made up mostly of members in their 20s and 30s, with a mix of gender and a variety of careers. I do not want them to be bound by conventional thinking but rather to have a flexible mindset as they drive the business forward.

Leveraging digital technologies to create new insurance value

Team Members of Tokio Marine X Small-Amount Short-Term Insurance (Commenced business in March 2023)
Kohei Miyatani (President), third from the left

Young employees in their 20s restructure the London branch, which was in financial crisis

Members of Tokio Marine London Branch
Front center, Kenkichi Kagami, and front far left, Hachisaburo Hirao (future Minister of Education) Photograph taken around 1898

If you compare these two pictures on this page, you might think that Tokio Marine has always been supported by the young generation. However, last year, I formed the “CEO Team” that includes non-Japanese officers, with the aim of enhancing management decision-making. This year, I established the Global Communications Department to further enhance internal and external communication. I personally will not cease to take on new challenges. There are not any role models, prototypes, or right answers in our search for our unique management style. However, as Group CEO, I am happy to take the lead and continue swinging the bat. We are in uncharted waters, and predicting even a little further ahead is not easy. However, the whole Group works together for high cadence of hypotheses testing cycle to plan and execute a seamless growth strategy.
From the outset, insurance is a “peopleʼs business.” As Group CEO, it is my job to nurture a culture and a climate that allows our staff to pour their passion into fulfilling our purpose. I place the utmost importance on this as I execute my responsibilities.
By continuing to serve our customers and society, we as a Company will continue to sustainably grow and increase our corporate value. This is the business management style that I want to achieve, and I am determined in my cause. I want you to keep the Company actively working, and I intend to build a future that meets everyoneʼs expectations. Please accept my appreciation, and I kindly ask for your continued support.