FY2025 Results Conference Call Summary of Q&A

We view share buybacks as a means of flexible shareholder returns, and the current MTP is aimed at a level that boosts EPS growth by about 2%. Our current market capitalization is c. JPY14tn, and 2% of that would be JPY280bn. However, we expect the capital policy to become more flexible, including through collaboration on M&A with Berkshire Hathaway. A detailed calculation of the partnership effect is not possible, but comprehensively considering future growth investments and the capital required for increased risk-taking, we deem JPY400bn to be the appropriate amount at present. 

We began reinsurance transactions with Berkshire Hathaway through WAQS, but we cannot disclose the specific scheme due to confidentiality obligations. Although WAQS will reduce risk volume, we believe the overall impact will be limited, considering the review of our entire reinsurance portfolio and new risk-taking. 

While there is normalization from unusually low Nat Cat losses in FY2025, we aim to achieve underwriting profit growth through disciplined risk screening and a focus on the bottom line, while mitigating the effects of the rate cycle with a diversified underwriting portfolio across insurance lines. The bolt-on M&A executed in FY2025 will further support profit growth. 

Our shareholder returns are based on dividends, and our policy of continuing to increase DPS in line with our profit growth remains unchanged. For FY2026, dividends were determined based on our objectives, including achieving DPS growth aligned with EPS growth. However, as we transition to the new accounting standard and dividend calculation method, we also emphasized continuity with the payout ratio under the previous definition. Specifically, we applied the 50% payout ratio to the previous standard, the 5Y average JGAAP Adjusted Net Income, to arrive at a projected DPS of JPY245 for FY2026. 

We recognize that our European peers have set a higher payout ratio of around 60%. However, we believe we still have ample room for growth, and we want to prioritize reinvesting the capital generated into business investments, such as M&A, and increasing risk-taking to drive further profit growth. Therefore, we believe maintaining the 50% payout ratio is appropriate.  

 As you pointed out, the difference is JPY120.0bn. It does not mean that we have decided to continue operating at this level in the future. The amount of capital that can be released through the Berkshire Hathaway partnership cannot be calculated definitively, and we arrived at the JPY120.0bn figure after comprehensive consideration of various factors. Share buybacks are a flexible means of returning capital to shareholders and may be reduced if we pursue large M&A in the future. Naturally, we have no intention of holding unnecessary capital and will continue to deploy capital in ways that improve ROE.

We carried out foreclosures between 2024 and 2025, and the balance is increasing. Our workout involves renovating and converting properties, increasing occupancy by attracting tenants, and aiming to sell after enhancing the recoverable value. This process may take a year or more, which can cause the balance to appear to grow, but our efforts are making steady progress. Concerning provisions, 5.3% covers total loans under IFRS standards. Provisions for CRE loans are about 9%, so the provision ratio for private loans is in the low single digits. Although the provision balance fluctuates, the ratio remains relatively stable. 

 The amount accounts for most of the decrease in FY2025 business unit profit in Asia & Oceania, which was -JPY47.6bn YoY. The CFO explained the background for including this amount in the FY2025 results at the beginning. To supplement, the disputed amount for Greensill-related litigation is about $5bn. We are negotiating a settlement with Greensill Bank’s insolvency administrator, one of the plaintiffs, over a $3bn claim. For the remaining $2bn, Credit Suisse is the plaintiff, and we have not reached a settlement at present. We participated in judicial mediation, a necessary process in litigation in Australia, held in March 2026. The reserve amount was deemed appropriate based on the mediation. The settlement is not final, so the amount may change, but we consider it the best estimate at present.

WAQS has already begun, but the impact on FY2026 profit is limited, as the overall reinsurance program will be optimized, and new risk-taking will be undertaken. How we utilize the capacity generated will demonstrate our capabilities. 

Main factors for the lower ESR include the bolt-on M&A in the previous fiscal year, additional risk-taking, and widening US credit spreads. Factors driving net asset fluctuations include profit accumulation, shareholder returns, and the bolt-on M&A mentioned above. 

The level of this indicator reflects the steady accumulation of contracts from the past. The increase between FY2025 and FY2026 is mainly due to the block reinsurance executed in FY2025. There is virtually no impact of interest rates on this indicator. 

It was not incorporated into the original projections, the November interim projections, or the February expected results. We sat at the mediation table in March 2026, and the reserves were incorporated to reflect the status of the mediation. 

Main factors contributing to reduced income include reversal from low Nat Cat losses in the previous year and lower dividends from selling business-related equities. These declines were partly offset by rate increases for auto and other factors. We are consistently taking steps to enhance profitability, and our underwriting profit is improving steadily. 

North American business is affected by rate softening to a certain extent, with rates slowing slightly, but is expected to maintain single-digit rate increases. For example, large property and reinsurance are experiencing rate decreases, while PHLY, which handles small- to medium-sized policies, is expecting around a 7% increase. HCC’s A&H is expecting double-digit growth, with the impact of inflation, while HCC’s D&O and cyber insurance are bottoming out. US casualty, including DFG, is realizing steady rate increases. 

Adjusted Net Assets as of Mar. 31, 2026, have increased by about JPY740.0bn from the Mar. 31, 2025 figure, which served as the basis for the projections at the September IFRS conference. This increase was mainly due to higher net assets of overseas subsidiaries from FX impact, along with progress in the sale of business-related equities. It did not increase due to IFRS-specific changes.