FY2018 Results Conference Call Summary of Q&A

Described below is the summary of Q&A session with institutional investors and securities analysts at the FY2018 results conference call held on May 20, 2019.

Q1ESR decreased due to decline in interest rates. Does it affect your capital policy? How will you control interest rate risks in the future?

A1

Although ESR as of Mar. 31, 2019 decreased to 174% due to decline of interest rates, it is still within our ESR target range (150% to 210%). So, our action does not change, which means to strategically consider business investment, additional risk-taking, and shareholder return.
Adjustment of capital level will be executed with flexibility based on relevant factors, such as market conditions, business opportunities, etc. We will implement a disciplined capital policy, considering accumulation of profits in FY2019 and natural catastrophe trends.
In addition, since there is a possibility of continuing low interest rate environment for a long time, we will reduce ESR sensitivity on interest rates through closely monitoring market conditions and purchasing long-term bonds.

Q2The original projections of TMNF underwriting profit (excluding catastrophe loss reserves) in FY2019 is projected to decrease to 135.0 billion yen while that of FY2018 was 171.8 billion yen. It seems that it was mainly due to an increase in E/I basis loss ratio of fire insurance by +6pt and expense ratio by +0.2pt YoY. What factors were behind this?

A2

As for the expense ratio, we projected a consumption tax increase and an increase in investment for business platform enhancement.
As for E/I basis loss ratio of fire insurance, it results from reflecting the current condition.

Q3TMNF profit projection seems low. Is there also any impact from an increase in net provision for underwriting result in first year?

A3

Yes. We projected to increase the provision driven by the improvement of loss ratio in FY2019 although there was negative provision due to an increase in natural catastrophes in FY2018.

Q4Isn’t the outlook of international insurance profit too conservative though considering the impact of reinsurance businesses divestment?

A4

Our original projection in FY2019 is +8% increase YoY when excluding reinsurance businesses divestment. It is due to the execution of growth measures in each business segment, mainly in North America and profit contribution of `Safety` and `Hollard`, etc.

Q5In which category is the losses on sales of the reinsurance businesses of -22.5 billion yen, in the supplemental Material for FY2018 Conference Call?

A5

It is in the ’Others (Elimination, etc.)’

Q6How much is the impact of rate revisions of fire insurance in October 2019?

A6

Full impact on profit is approximately 15.0billion yen and the impact in FY2019 is projected approximately 13%.

Q7Do you include rate increase of automobile insurance in FY2019 projections?

A7

We project cost increase relating to the consumption tax rise in October 2019 and the revision of law of obligation in April 2020, and implementation of certain measures against these events. However, we will consider necessity of rate revision and the rate level, based on future profitability trends, etc.

Q8Tokio Marine has raised dividend per share by 20 yen for the past three years. Why do you project to increase the dividend by 10 yen in FY2019?

A8

Projection for adjusted net income in FY2019 is 400.0 billion yen, and based on this, the average adjusted net income is projected to increase by 15.0 billion yen to 355.0 billion yen YoY. We expanded the source of dividend despite the large natural catastrophes in FY2017 and FY2018 and project DPS increase for eight consecutive years. We also plan to raise the payout ratio gradually and the projection of FY2019 is increased by +2pt to 38% while that of FY2018 was 36%.

Q9Your projection of adjusted ROE in FY2019 is 10.4%, already exceeding the mid-term target due to the capital level adjustment, etc. As your capital efficiency is steadily rising. why don’t you implement further business investment?

A9

We decide how to use the capital, based on ESR and market conditions, etc. As our ESR is within target range, our policy is to strategically consider business investment, additional risk taking, and shareholder return. Since we are still at a growth stage, we would like to implement business investment on a priority basis.

Q9（2）Is there a possibility that ROE will be 12% to 13%?

A9（2）

Yes. It is because our adjusted ROE target in FY2020 is set at 10% or more in this mid-term business plan.

Q10Has your growth slowed down if compared original projections of international insurance business in FY2019 to that in FY2018?

A10

We recognized that the business environment has become more severe due to an increase in claim cost associated with social inflation and more intense competition in North America. Although we consider these negative elements on our FY2019 projections, we will aim to grow by steadily executing growth measures, leveraging each company’s strengths.

Q11Are you conscious of total shareholder return ratio when you consider the level of shareholder return?

A11

Our primary means of shareholder return is dividends, and we increase continuous dividend total in accordance with profit growth. We will adjust our capital level flexibility based on comprehensive consideration of market conditions, business investment opportunities, and other relevant factors.
Total shareholder return ratio is a result from these, so we have no target of total shareholder return ratio.

Q12If ESR would not have decreased this time due to a decline of interest rates, could we get more shareholder return?

A12

Current ESR of 174% is within the target range. Therefore, we decided to implement business investment, additional risk taking, and shareholder return in a comprehensive manner.

These information materials are prepared based on the currently available information for us and described subject to our predictions and forecasts carried out at the time of preparation.
It must be noted that what is described therein does not guarantee our future business performance and carries certain risk of misjudgment or uncertainty.
Accordingly, you are kindly requested to bear in mind that there may be a possibility of sizable divergence between the actual business performance in the future and that of our predictions or forecasts described therein.