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Enhancement of Corporate Value through Capital Policy

Through our efforts to help resolve social issues, Tokio Marine Group aims to become a leading global insurer delivering significant value to all our stakeholders, including customers, society, shareholders, and employees. Specifically, we aim to achieve stable double-digit return on equity (ROE) and high-level shareholder return.
In the course of working toward these goals, we are creating capital through strategic business portfolio revisions focused on organic growth in Japan and overseas. This capital is allocated to M&As and other business investments or returned to shareholders if there are no candidates for a good investment, making for an ongoing capital cycle.

Capital Cycle for Realizing Our Goal

[Our Goal]Leading global insurer delivering significant value to all our stakeholders Stable double-digit ROE High-level shareholder return [Organic growth]Sustain stable profit base in Japan Focus on specialty in developed countries Capture growth potential in emerging countries+[Review our business portfolio]Strategic capital release Appropriate risk control / Generation of capital[Business investment]Disciplined strategic M&As & Additional risk-taking / Adjustments of Capital [Shareholder return]Increase dividends Flexible capital level adjustment

(Reference) Mid-Term Business Plan Targets and Progress

Adjusted net income : Mid-Term Business Plan Targets ¥400.0–¥450.0 billion (CAGR 3%–7%)*1 Fiscal 2019 Targets ¥400.0 billion / Adjusted ROE : Mid-Term Business Plan Targets 10% or more Fiscal 2019 Targets 10.4% / Shareholder return Payout ratio*2 : Mid-Term Business Plan Targets 35% or more Fiscal 2019 Targets 38% *1 CAGR is calculated based on a normalized basis of ¥372.0 billion in fiscal 2017. Adjustments for producing a normalized basis included lowering natural catastrophes to a normal level and excluding the impacts of foreign exchange rate fluctuations and the one-time effect of the tax reforms in the United States. *2 Payout ratio is based on the five-year average for adjusted net income.

Initiatives for Achieving Stable Double-Digit ROE

The ongoing improvement of profitability and diversification of risks accomplished through large-scale M&As in Europe and the United States has driven steady growth in Tokio Marine Group's ROE, which has remained consistently above a cost of capital*1 of 7% with low volatility. Our ROE is approaching the level of our peers, and we will seek to further enhance ROE going forward.

Cost of capital*1 of 7%/2011 1.3% /2013 8.2% /2017-2018 Impacts of greatly above-average damage of natural catastrophes /2018 7% /2019(Projection) Adjusted ROE 10.4% *1 Cost of capital is the profit margin investors expect from investees. Tokio Marine Group calculates cost of capital based on the capital asset pricing model (CAPM) and uses this figure to determine growth indicators and make business investment decision. We have increased ROE by enhancing profitability and risk diversification through large-scale M&As in the U.S. and Europe. We aim for higher ROE toward our goal.

High-Level Shareholder Return

[Dividends]Dividends are our primary means of shareholder return, and we plan to sustainably increase dividends in line with profit growth.  Payout ratio*2 is above 35% for the five-year average for adjusted net income, and will be raised gradually to approach the level of our peers and move us toward our goal.[Capital Level Adjustment]We will adjust our capital level with flexibility through share repurchases and other means based on comprehensive consideration of market conditions, business investment opportunities, and other relevant factors.Dividends per share (yen)  Payout ratio*2 Total dividends*3 (billions of yen) Capital adjustment*4(share repurchases, etc.)(billions of yen) /2016 140 35% 1,053 500/2017 160 35% 1,176 1,500/2018 180 36% 1,280 1,250/2019(Projection) 190 38% 1,342 T.B.D [Eighth consecutive year of higher dividends projected in fiscal 2019]Our goal Level of peers*5 High-Level Shareholder Return *2 Payout ratio is based on original projections. *3 2019 (projection) is before reflecting share repurchases. *4 Total amount approved by the announcement date of full-year results of respective years. The figure for 2018 includes one-time dividend payments totaling ¥50.0 billion. *5 The current Peers payout ratio is approximately 50%.