Described below is the summary of Q&A session with institutional investors and securities analysts at the FY2025 2Q results conference call held on November 19, 2025.
- Q1How are the softening of US and European insurance markets and the North American credit market incorporated into the revised projections?
- A1
TMHCC and Europe were mainly affected by rate decreases across lines such as D&O, cyber, and large property, which led to a downward revision of the top-line. However, the impact on income is minor due to our strong focus on the bottom-line. For the overall international business, PHLY, DFG, and TMSR (Brazil) are driving top-line growth.
Regarding North American credit investments, our results are expected to be mostly in line with the original projections. We initially assumed approx. three rate cuts by the Fed this year, and because this has not meaningfully diverged from the actual conditions, investment income is expected to progress broadly in line with the original projections. Capital losses on CRE loans are lower than expected because some properties reported unrealized gains while the market remained flat or gradually recovered. Conversely, capital losses have increased on other loans, mainly related to private loans (direct lending). Borrowers are facing higher interest rate burdens due to the persistent high-rate environment, and we have accounted for a certain level of impairment or increased CECL for some sectors. Each case of capital loss is scrutinized, and measures such as stricter investment discipline are being implemented as necessary. However, we view these as temporary events within the economic and credit cycle, unlike the structural issues in the office sector for CRE loans. - Q2On P.43 of the conference call materials, the balance of CRE loans has decreased since the end of FY2024. I assume the decrease due to foreclosure is one of the reasons. What is the current foreclosure balance?
- A2
Foreclosure as of 2Q was approx. USD1bn. The balance for CRE loan is approx. 10.6bn, which is the sum of the loan balance USD9.6bn stated on P.43 and the foreclosure balance.
- Q3What factors contributed to the downward revision of the top-line in Europe?
- A3
The majority of the risks underwritten by TMK are in North America, reflecting the impact of softening in some lines like Property.
- Q4Am I correct in understanding that the revised projections for selling business-related equities are conservative?
- A4
The revised plan of JPY660.0bn sale of business-related equities (+JPY60.0bn vs original projections) reflects the stocks for which we have currently secured agreements on the sale within FY2025, and is not conservative.
- Q4（2）Does that mean an upswing from the projections is possible if additional agreements are reached?
- A4（2）
We continue to engage with issuers regarding the sale of business-related equities, aiming to reduce the balance to zero by the end of FY2029. If additional agreements are reached on the sale within FY2025, the plan would exceed the revised projections.
- Q5Why was the natural catastrophe (Nat Cat) budget maintained in Japan P&C?
- A5
It leaves over JPY60.0bn in funds for 2H. We kept this unchanged, considering the possibility of snow damage and the frequent occurrence of hail damage in recent years. Hail damage could happen again during 2H, as a single event could be significant, like in April 2024. The 2H Nat Cat budget might seem to include a substantial buffer, given that the actual 5-year Nat Cats losses were approx. JPY30.0bn, with the largest being approx. JPY50.0bn, but it accounts for the possibility of large-scale hail damage, etc., and we ask for your understanding in this regard.
- Q5（2）How does the 1H result compare to the original projection?
- A5（2）
The result was at a lower level than the 5-year average for 1H.
- Q6For Auto, what is the likelihood of achieving the medium-term plan (MTP) target of “C/R 95% or lower in FY2026”?
- A6
We implemented a rate revision (+8.5%) in October to meet the MTP target. 1H results showed monthly fluctuations primarily for accident frequency. We will continue to monitor the trends, including accident frequency and unit price, and implement flexible measures as needed.
- Q7What was the background for the announced share buyback through tender offer? Will share buybacks using the same method be possible in the future?
- A7
MUFG Bank indicated the sale of our shares, and we discussed the timing and method, which led to the announcement. Please confirm the tender offer statement or the news release for details. As part of FY2024 1H share buybacks, we executed a share buyback through a tender offer in response to Toyota Motor’s intention to sell our shares. We will determine the methods on a case-by-case basis in the future.
- Q7（2）What is the benefit of conducting share buybacks using this method for shareholders?
- A7（2）
It can help avoid a temporary deterioration in market supply-demand dynamics that could arise if potential tendering shareholders were to sell their shares in the open market instead. In addition, a tender offer could lower our share acquisition cost by purchasing shares at a discount to the market price.
- Q8What was the reason behind the increased advertisement cost for Tokio Marine Direct Insurance (TMDI)?
- A8
As customer behaviors change, we announced the rebranding of E. Design Insurance to TMDI in late July, and officially changed the company name on October 1st to strengthen our efforts in the direct insurance market. As a result, performance in October was strong, with both the number of new policies and premiums written approx. at 1.2 times YoY.
- Q9Have there been any changes in the environment for Japan P&C’s auto insurance? What has been response to the +8.5% rate increase implemented in October? Also, as the sale of business-related equities proceed, is there any impact on fleet auto insurance?
- A9
For TMNF on a standalone basis, October results were robust: net premiums written for auto insurance overall and auto fleet insurance were 107.0% and 113.2% YoY, respectively. We believe that we have been able to promote and implement our initiatives thanks to the strengths of the agency channels and their solid relationships with customers.
- Q10Can you continue increasing rates even if C/R is below 95% in FY2026?
- A10
We cannot be optimistic given the current uncertainties, including higher part costs due to inflation and increased labor charges due to social factors such as the appropriate pass-through of labor expenses. We will continue to monitor trends and implement flexible measures as needed.
- Q11As the long-term JGB yields rise, are there risks for Japan Life, such as bond portfolio rebalancing? Also, are you considering any product mix strategies like introducing products that involve interest rate risks?
- A11
Even as JGB yields rise, we are maintaining proper control through ALM. We are accounting for certain losses from bond sales but will implement an optimal interest rate hedging strategy, including block reinsurance. Regarding the product mix, we launched a single-premium whole life insurance (Anshin Yume Shushin) in September. We will continue to promote sales of savings-oriented products, considering product designs that can reduce interest rate risks.
- Q11（2）Will you review your strategy, for example, using movements in the 40 year JGB yield as a trigger?
- A11（2）
We have not set specific triggers. We manage our overall risks by monitoring MCEV’s interest-rate sensitivity and risk exposure.
- Q12What was the background for increasing incurred losses for other specialty lines in Japan P&C under the revised projections?
- A12
The revision was made considering the increase in large losses compared to the original projections.
- Q13Are incurred losses for cyber insurance showing an increasing trend?
- A13
There is currently no significant increasing trend.
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.