Tokio Marine Group Business Plan Update November 2013 Tokio Marine Holdings, Inc.
Table of Contents I. Tokio Marine Group Vision P. 2 Ⅰ II. Ⅱ Progress of the Mid-Term Business Plan P. 6 III. Ⅲ Business Plan and Strategy by Domain 1. Domestic Non-Life P. 13 2. Domestic Life P. 18 3. International Insurance P. 22 4. Asset Management P. 28 5. ERM & Return to Shareholders P. 30 Reference P. 33 Abbreviations used in this material TMNF: Tokio Marine & Nichido Fire Insurance Co., Ltd. NF : Nisshin Fire & Marine Insurance Co., Ltd. TMNL : Tokio Marine & Nichido Life Insurance Co., Ltd. FL : Tokio Marine & Nichido Financial Life Insurance Co., Ltd. 1
Ⅰ. Tokio Marine Group Vision 2
Ⅰ: Tokio Marine Group Vision 1. Good Company Aim to create sustainable corporate value by pursuing profit which is the outcome of customer trust Look Beyond Profit We are a company that stands strong advancing towards the future, as we strive to deliver value for the benefit of our customers, shareholders, business partners, and society based on the principle of "profit will always follow after moral goodness" Empower Our People Insurance business is a "People's Business" Our human resources and organizations filled with talented, enthusiastic and self-motivated people are the root of our competitiveness and the valuable assets that enable us to achieve sustainable growth Deliver on Commitments Our results are the barometer of stakeholders' trust We will pursue long-term superior results by focusing on full commitment and building trust 3
Ⅰ: Tokio Marine Group Vision 2. Our Key Value Drivers (Sources of Value Creation) We can consistently enhance corporate value even in a changing environment through improving the Group's value drivers Sound capital base Strong ERM Solid franchise and strong brand in homeland market "Good Company" Disciplined underwriting and ALM Lineup of overseas subsidiaries with distinctive strong growth Balanced business portfolio of domestic and overseas, life and non-life 4
Ⅰ: Tokio Marine Group Vision 3. Environment Surrounding the Group Distinguish between risks and opportunities in the changing business environment and convert changes into our growth opportunities Improving insurance demand due to economic recovery trend Mid-Term Impact of consumption tax hike Expectations of economic growth and new opportunities from "Growth strategy" of Abenomics including TPP, deregulations, etc. Insurance Market Japan Overseas Long-Term Developed Countries Change in market structure due to demographic changes Impact from change in customer preferences and needs, as well as technological innovation Possibility of reform of the social security system due to the aging society Market size continues to be predominant U.S. economy:growth is continuing EU: Avoided crisis for the moment Emerging Countries Although there is difference in growth rate, overall growth potential is high Issues such as economic vulnerability and restriction on foreign investment Regulations Possible implementation of economic value based capital requirements (SVII, IFRS) Movements of global based insurance supervision and regulations (G-SIIs, IAIG, etc.) Trend of natural catastrophe risks Risks Trend of risks due to demographic changes Increase in volatility in global financial markets 5
Ⅱ. Progress of the Mid-Term Business Plan 6
Ⅱ: Progress of the Mid-Term Business Plan 1. Key Message Business Plan is progressing favorably to achieve the Mid-Term Business Plan Targets Although the full-year projection for adjusted earnings is revised downward due to the effect of change in EV risk discount rate ( - 44.4B) in accordance with the interest rate changes, excluding this temporary effect, expected growth exceeds the original projection Adjusted Earnings Original (a) 209.1 226 (billions of yen, expect for %) Revised (b) (b) - (a) YoY 213 257* -13 +31* +3.9 +47.9* Adjusted ROE 6.7% 6.6% 6.0% 7.2%* - 0.7pt +0.5pt* -0.7pt +0.5pt* *Excluding effect of change in EV risk discount rate ( - 44.4B) Continuously aim to achieve the FY2014 Mid-Term targets by accurately responding to the changes in business environment and implementing the strategies of each business domain <Strategies of the Mid-Term Business Plan> Domestic Non-Life Domestic Life International Insurance Aim for improvement in combined ratio through continuous product and rate revisions, etc. to improve profitability Aim for industry-leading growth by strengthening customer contacts Aim for maintained profit growth by developing unique and value-added products as well as promoting the integration of life and non-life sales approach Aim for well-balanced growth in both developed and emerging countries Continuously aim for further improvement in capital efficiency through business portfolio diversification and geographical diversification of risks underwritten annual dividends per share is planned to be raised by 5 yen to 60 yen, an increase for two consecutive fiscal years 7
Ⅱ: Progress of the Mid-Term Business Plan 2. Progress of Business Plan (2Q Adjusted Earnings ) (billions of yen) Group Total 73.3 2Q +34.8 108.2 2Q Effect of risk discount rate change - 41.6B Increased by 34.8B YoY due to growth in domestic non-life and international insurance businesses, despite the effect of change in risk discount rate* used for EV calculation ( - 41.6B) in domestic life business *Risk discount rate is based on the risk-free rate (20-year JGB interest rate) plus risk premium rate of 6% which is then rounded-off at 1% intervals. Due to the change of the risk-free rate to 1.59% as of the end of Sep. 2013, the risk discount rate was increased by 1% (risk-free rate as of the end of Mar. 2013: 1.42%) Domestic Non-Life +7.1 26.4 33.6 2Q 2Q TMNF: Increased due to a decrease in natural catastrophe losses and improvement in underwriting results in fire and auto, despite an increase in provision for reserves for foreign currency denominated outstanding claims associated with the depreciation of the yen, etc. NF: Increased mainly due to improvement in underwriting results and reduction of business expenses Domestic Life 16.4 2Q - 15.8 0.6 2Q Effect of risk discount rate change - 41.6B TMNL: Although decreased mainly due to the effect of increase in risk discount rate used for EV calculation in accordance with the interest rate changes, would have been an increase excluding this effect FL: Increased mainly due to improvement of the investment environment International Insurance 28.3 +42.7 71.0 Increased significantly due to the depreciation of the yen, decrease in natural catastrophe losses, and profit contribution from Delphi's consolidation, as well as organic growth of each entity 2Q 2Q 8
Ⅱ: Progress of the Mid-Term Business Plan 3. Progress of the Mid-Term Business Plan Adjusted Earnings & Target of Each Business Domain (billions of yen) Domestic Life Effect of risk discount rate change: +38.8 209.1B ( 170.3B) *1 48.3 110.3 (71.5) *1 226B 70 63 ( 257B) *1 213B 59 35 (79) *1 Domestic Life Effect of risk discount rate change: - 44.4 230B - 260B 80-90 60-70 Domestic Non-Life 35% Domestic Life 25% International Insurance 40% - 19.5B 69.2 90 115 90-100 Financial and General - 18.7 FY2011 () () Original () Revised FY2014 (Target Level *3 ) Mid-Term Business Plan "Innovation and Execution 2014" Domestic Non-Life *2 Combined ratio 103.3% NPW growth rate 102.3% 97.4% 104.9% No.1 growth in the industry 97.2% 102.2% 94.8% 104.1% Combined ratio 95% No.1 growth in the industry Domestic Life EV increase 15.9B 110.3B ( 71.5B) *1 63B 35B ( 79B) *1 EV increase (3 year total) 180B International Insurance Total Adjusted earnings -11.9B Adjusted ROE -0.7% 69.2B 6.7% 90B 6.6% 115B 6.0% (7.2%) *1 Adjusted earnings 100B Adjusted ROE 7%~ *1 Excluding effect of change in risk discount rate used for calculation of the Embedded Value in domestic life insurance business *2 Figures of TMNF *3 Applied share price, FX rates, and interest rates are as of end-mar. 2012. In addition, projected profit level is based on the 9 assumption that natural catastrophe losses are projected to occur on an average level, etc.
Ⅱ: Progress of the Mid-Term Business Plan 4. Adjusted Earnings (Revised) Adjusted Earnings by Business Domain (billions of yen) Business Domain Original (a) TMNF Adjusted Earnings Revised (b) Difference (b) - (a) Domestic Non-Life 48.3 70.0 59.0-11.0 TMNF 54.6 72.0 60.0-12.0 NF -0.9 1.0 3.0 2.0 Other -5.4-3.0-4.0-1.0 Domestic Life *1 110.3 63.0 35.0-28.0 TMNL 89.7 67.0 30.0-37.0 FL 20.6-4.0 6.0 10.0 Other -0.1 0.0-1.0-1.0 International Insurance 69.2 90.0 115.0 25.0 PHLY 24.5 28.0 30.0 2.0 Delphi 11.9 23.0 29.0 6.0 North America 7.3 3.0 4.0 1.0 Kiln 5.6 17.0 20.0 3.0 Europe & Middle East 2.2 1.0 0.0-1.0 South & Central America 2.0 2.0 2.0 0.0 Asia 2.2 6.0 17.0 11.0 Reinsurance 10.2 12.0 13.0 1.0 International Non-Life *2 66.0 92.0 115.0 23.0 International Life 4.7 2.0 1.0-1.0 Financial & General -18.7 3.0 4.0 1.0 Group Total 209.1 226.0 213.0-13.0 Adjusted ROE (Group total) 6.7% 6.6% 6.0% -0.7% *1: Excluding capital transactions *2: International Non-Life figures include some life insurance premiums of composite overseas subsidiaries Gains/loses on Net income of Provision of Provision for Gains/losses on sales or Other extraordinary sales or evaluation Adjusted TMNF for catastrophe loss price fluctuation evaluation of profits/losses and + + - of ALM bonds and - - = earnings of accounting reserves, etc. net reserves, net of stocks and valuation reserves interest rate swaps, purposes of taxes taxes net of taxes properties held, etc., net of taxes TMNF net of taxes 130.0B 8.5B 2.5B 10.9B 47.3B 22.8B 60.0B Group total adjusted earnings revised downward by 13B from the original projections to 213B. Projected Adjusted ROE is 6.0% Excluding the effect of risk discount rate change used for calculation of EV ( - 44.4B), group total adjusted earnings would increase by 31B from the original projections to 257B Domestic Non-Life TMNF:Downward revision by 12B to 60B from the original projections Increase in provision for reserves for foreign currency denominated outstanding claims due to further depreciation of the yen Impact of consumption tax hike, etc. Domestic Life TMNL:Downward revision by 37B to 30B from the original projections Increase in EV due to a steady increase in new policies Decrease in EV due to changes in risk discount rate, etc. FL:Upward revision by 10B to 6B from the original projections Increase in EV due to the improvement of the investment environment, etc. International Insurance Upward revision by 25B to 115B from the original projections Profit increase due to further depreciation of the yen Decrease in outstanding claims reserves in Asia relating to Thai Flood occurred in FY2011 10
Ⅱ: Progress of the Mid-Term Business Plan 5. Impact of Consumption Tax Hike (Estimate) Although the impact of the consumption tax hike will start to fully appear in FY2014, there is no change in our targets. By implementing timely and appropriate measures on the premise of cost control through management efforts, we aim to achieve the Mid-Term Business Plan targets 2014 5% April 8% FY2014 1 Impact on consolidated net income Approx. - 4B Approx. - 22B of TMNF Increase in incurred losses Increase in business expenses Approx. - 4B Increase in provision for outstanding claims reserves Approx. - 19B (+1.8 pt) *1 *1 Impact on W/P combined ratio (Private insurance basis) of TMNL Increase in business expenses - Approx. - 1B 2 Impact on adjusted earnings *2 Approx. - 4B Approx. - 21B *2 Major impact on domestic life insurance was factored in EV at the end of. Figures in the above table represent expected impact on domestic non-life 11
Ⅲ. Business Plan and Strategy by Domain 12
Ⅲ. Business Plan and Strategy by Domain 1. Domestic Non-Life 2. Domestic Life 3. International Insurance 4. Asset Management 5. ERM & Return to Shareholders 13
Ⅲ: Business Plan and Strategy by Domain 1-1. TMNF Net premiums written is revised upward by +1.9% from the original projections, reflecting economic recovery and first-half results Adjusted earnings is revised downward, due to the depreciation of the yen and expected impact of consumption tax hike. Excluding these two factors, remains at almost the same level as the original projections Net Premiums Written (billions of yen) +36 1,911 1,869.6 1,947 Net Premiums Written Upward revision by 36B (+1.9%) from the original projections mainly due to: Upward revision mainly in auto and fire, factoring in the increase in new vehicle sales and housing starts as well as the first-half results (Original) Adjusted Earnings (billions of yen) 54.6 72 (Original) -12 (Revised) 60 (Revised) Adjusted Earnings Downward revision by 12B from the original projections mainly due to the following. Excluding these factors, adjusted earnings would have been projected at the similar level as the original projections Depreciation of the yen (*) : Increase in provision for reserves for foreign currency denominated outstanding claims Losses on FX forwards and currency swaps etc. (*)FX rate(usd/jpy) : Mar. 31, 2013: 94.05 yen Sep. 30, 2013: 97.75 yen (3.7 yen depreciation) 14 Consumption tax hike: Increase in provision for outstanding claims reserves
Ⅲ: Business Plan and Strategy by Domain 1-2. TMNF Combined Ratio Combined ratio is expected to improve in line with the Mid-Term Business Plan Regarding the impact of consumption tax hike, we continue to aim at achieving the Mid-Term Business Plan targets with additional measures taken into consideration Combined Ratio (Private insurance basis) 103.8% E/I basis Major factors of change in combined ratio (Difference from the original projections) 103.3% W/P basis 99.6% 97.4% Figures in parentheses are the difference from the original projections 96.3% ( + 0.6pt) 95% 1. W/P loss ratio: Downward revision by 2.0 points Carry-over of a part of claims payment relating to natural catastrophes occurred in previous fiscal years, to FY2014 Reflecting the impact from the decrease in claims frequency in auto FY2011 94.8% ( -2.4pt) (Revised) FY2014 Target (billions of yen, except for %) FY2011 (Original) (Revised) Net premiums written 1,545.6 1,618.5 1,649.6 1,679.4 Net claims paid (including loss adjustment expenses) 1,071.5 1,045.1 1,060.3 1,045.8 Natural catastrophe losses 153.6 70.0 75.6 60.5 W/P loss ratio 69.3% 64.6% 64.3% 62.3% Natural catastrophe losses 9.9% 4.3% 4.6% 3.6% Expense ratio 34.0% 32.8% 32.9% 32.5% W/P C/R 103.3% 97.4% 97.2% 94.8% E/I loss ratio 69.8% 66.8% 62.8% 63.8% Net E/I C/R (*) 103.8% 99.6% 95.7% 96.3% 2. E/I loss ratio: Upward revision by 1.0 point Increase in provision for reserves for foreign currency denominated outstanding claims due to the depreciation of the yen Increase in provision for outstanding claims reserves due to consumption tax hike 3. Expense ratio: Downward revision by 0.4 points Mainly due to an increase in net premiums written (*):Net E/I C/R = E/I loss ratio + W/P expense ratio 15
Ⅲ: Business Plan and Strategy by Domain 1-3. TMNF Profitability Improvement in Auto Positive effects of past measures for profitability improvements are steadily appearing We will implement timely and appropriate measures for consumption tax hike and increase in unit repair cost Loss Ratio W/P loss ratio 70.7% 70.4% 69.4% 67.8% E/I loss ratio Figures in parentheses are the difference from the original projections 67.1% ( -0.7pt) Major factors of change in loss ratio (Difference from the original projections) 1. W/P loss ratio: Downward revision by 0.9 points Reflecting the impact from the decrease in claims frequency Increase in unit repair cost for vehicle damage and property damage liability coverage 2. E/I loss ratio: Downward revision by 0.7 points In addition to the above, increase in provision for outstanding claims reserves due to consumption tax hike FY2011 (billions of yen, except for %) FY2011 (Original) (Revised) 65.5% ( -0.9pt) (Revised) Net premiums written 865.6 908.1 929.4 943.0 W/P loss ratio 70.4% 67.8% 66.5% 65.5% W/P C/R 102.6% 98.5% approx. 97% 96.0% E/I loss ratio 70.7% 69.4% 67.8% 67.1% Net E/I C/R (*) 102.9% 100.2% approx. 99% 97.6% (Ref.) Expected effects onwards from past measures Product and rate revisions already implemented such as the introduction of age-bracket rate plans Mitigation effect of structural future decrease in per policy premiums by the revision of the Grade Rating System Rate revisions and profitability improvements per FY (excluding revision of the Grade Rating System in non-fleet auto insurance) Revision FY09 FY10 FY11 FY12 (*):Net E/I C/R = E/I loss ratio + W/P expense ratio Total 6.0 19.0 17.0 20.0 19.0 27.0 4.0 16 FY13 FY14 (billions of yen) FY15 Jul. 2009 6.0 13.0 1.0 Jul. 2010 6.0 13.0 1.0 Jan. 2012 3.0 18.0 7.0 Oct. 2012 1.0 8.0 1.0 Oct. 2013 4.0 26.0 4.0
Ⅲ: Business Plan and Strategy by Domain 1-4. TMNF Growth Strategy (Achieving No.1 Growth in the Industry) Achieve sustainable growth with profitability by strengthening customer contacts and offering quality that customers select Enhance quality and quantity of sales channels Provide competitive products and services Cultivate new market through alliance with Meiji Yasuda Life Insurance Company and expansion of superior agents, etc. Alliance with Meiji Yasuda Life Insurance Company (Premium increase) FY12 results: 12.7B FY13 projections: 4.0B Expansion of new agents FY13 plan: 1,800 agents Improve renewal ratio through sales promotion of Super Insurance and customer oriented sales approach utilizing tablet PCs Super Insurance Tremendous improvement in ease of sales through product and system renewals in Oct. 2010 Renewal ratio as of the end Sep. 2013 :97.3% Increase per policy premiums through conducting product and rate revisions and proposing wider coverage to the customers + + 105% 105 100 104.0% Auto insurance in-force polices growth rate* FY10 FY2010 17 FY11 FY12 FY13 end-sep. Auto Insurance Renewal Ratio 1H 94.5% 95.6% Auto Insurance Per Policy Premiums (FY2010 = 100)* 103.0% FY2011 1H 102.0% 101.0% 101.2 103.1 103.3 100.0% Auto 1,000 900 800 700 Achieve sustained growth through top line growth and improved profitability Net Premiums Written (billions of yen) Auto Private insurance total Private insurance total 13 年度予想 1,300 FY10 FY11 FY12 ( 修正 FY13 ) () Left figures are for non-fleet contracts *FY2010 financial results (on a managerial accounting basis) is set at index value of 100 1,700 1,600 1,500 1,400 17
Ⅲ. Business Plan and Strategy by Domain 1. Domestic Non-Life 2. Domestic Life 3. International Insurance 4. Asset Management 5. ERM & Return to Shareholders 18
Ⅲ: Business Plan and Strategy by Domain 2-1. TMNL (Revised) Annualized Premiums (ANP) (billions of yen) New policy In-force policy 419.4 470.4 +9.0 518.4 527.5 +10.3 ANP: Projected to continue favorable sales of the third-sector line and individual annuities as in the previous fiscal year Upward revision in both new and in-force policies from the original projections 57.3 80.6 81.0 91.3 FY2011 (Original) Fiscal Year-end EV (billions of yen) 516.3 601.1 656.8 67.0 (Revised) - 44.7 30.0 Effect of risk discount rate change 619.2 Increase in EV: Downward revision by 37.0B from the original projections due to the change in risk discount rate However, EV increase excluding the said impact *2 is revised upward FY2011 (Original) (Revised) Fiscal year-end EV (a) (b) (b) - (a) 516.3 601.1 656.8 619.2-37.0 EV increase *1 76.4 89.7 67.0 30.0-37.0 *1: Excluding capital transactions *2: Excluding capital transactions and effects of changes in interest rates, EV increase *2 48.8 61.5 65.0 67.0 + 2.0 risk discount rate, and underlying assumptions 19
Ⅲ: Business Plan and Strategy by Domain 2-2. TMNL Product Strategy Maintain growth with profitability through product development reflecting the growing needs of life insurance that protect one's living Hospitalization and surgical treatment Outpatient treatment (after discharge) Inability to work (home care) Medical insurance Cultivate potential market (Life insurance to protect one's living) Lineup of "Premium Series*" Whole life +Nursing care "Long-life Support Whole Life" Medical +Inability to work Released Nov. 2010 "Medical Kit" with inability-to-work support Household income +Inability to work Released Aug. 2011 Released Oct. 2012 "Household Income Term" with inability-to-work benefit Achieving Steady Growth (ANP of personal insurance new policy ) Steady growth mainly through launching new products for living benefits despite the severe competition in the industry (billions of yen) 6.3 13.6 FY11 2Q 6.6 20.0 FY12 2Q Third sector line* *: Medical, accelerated benefit, etc. First sector line Maintain & Improve Profitability (Value of new policies) 10.8 23.4 FY13 2Q Nursing care requirement (permanent disability) Death Conventional life insurance Medical + Refund "Medical Kit R" Released Jan. 2013 Refund the difference between total premiums paid until age 70 and the total benefit received No change in premiums for same coverage even after age 70 Cumulative Sales (Jan-Sep) of approx. 160 thousand policies (billions of yen) 4.8 FY09 7.4 FY10 15.6 FY11 22.2 FY12 *Series of unique products with high added value 20
Ⅲ: Business Plan and Strategy by Domain 2-3. TMNL Channel Strategy Utilization of Multiple Sales Channels Centering on Non-Life Agents Each Sales Channel Contributes to Growth (Channel weight *1 ) Bancassurance Approx. 5% Life Professionals Approx. 25% Life Partner* 2 Approx. 10% * 2: Life Partner is TMNL's life insurance sales staff Non-Life Agents Approx. 60% Non-Life Agents Channel Non-Life Customer Development through Integration of Life and Non-Life Sales Non-life customer development by further promoting integration of life and non-life sales Life Partner *2 Non-life customer development through sales with consultation expertise Life Professionals Bancassurance Market development centering on sales of unique products Cultivate banks' customer base through sales of highly unique products centering on installment plans YoY Change *1 (Approx.) +20% +10% +20% +100% *1: On a managerial accounting basis as of the end of 2Q Auto Tokio Marine & Nichido Fire Tokio Marine & Nichido Life Non-Life Insurance Agents Fire Death Non-Life Policy Holder (Individual & Corporate) P.A. Nursing Care Medical Super Insurance 21
Ⅲ. Business Plan and Strategy by Domain 1. Domestic Non-Life 2. Domestic Life 3. International Insurance 4. Asset Management 5. ERM & Return to Shareholders 22
Ⅲ: Business Plan and Strategy by Domain 3-1. International Insurance Business (Overview) Achieve sustainable growth and profit expansion as the growth drivers of Tokio Marine Group International Insurance Business Strategy in the Mid-Term Business Plan Promoting balanced growth in developed and emerging countries Developed countries: Aim for sustainable profit expansion in Europe and North America, the main global insurance markets, Emerging countries: especially in commercial lines and reinsurance business Aim for medium to long-term profit growth in both life and non-life as emerging insurance markets expand Driving steady growth with both organic growth and M&A Organic growth: Aim for sustainable and profitable growth while maintaining underwriting discipline M&A: Smoothly integrate Delphi's business and consider further opportunities for M&A Diversifying business risks and improving capital efficiency Aim for business diversification among life, non-life, and reinsurance and geographical diversification of underwriting risk Develop a well-balanced portfolio in order to improve capital efficiency Enhance ERM and implement a global HR strategy Improve controls for natural catastrophe and non-modelled risks Develop a talent pool of global leaders and recruit and train professional human resources Growth strategies are progressing on track We will continue to implement each strategy 23
Ⅲ: Business Plan and Strategy by Domain 3-2. International Insurance Business Net Premiums Written and Adjusted Earnings Net premiums written 734.3 51.3 78.3 604.7 920 56 83 992 781 827 (Original) 67 98 (Revised) Adjusted earnings 69.2 4.7 10.2 55.8 (billions of yen) Non-life primary Reinsurance Life 115 90 2 12 80 (Original) 1 13 102 (Revised) International Insurance Business Total Net Premiums Written Upward revision from the original projections by 72B to 992B due to the depreciation of the yen ( 31.5B) and revenue growth in Philadelphia, Brazil, and life insurance business Adjusted Earnings Upward revision from the original projections by 25B to 115B mainly due to: i. Depreciation of the yen ( 5.4B) ii. Profit increase in Asia associated with changes in reserves related to Thai flood iii. Profit contribution from Delphi iv. Progress of growth strategies in each business Business and Geographical Portfolio Breakdown ( projections / adjusted earnings basis) South & Central America 2% Reinsurance 11% Asia 15% Philadelphia 27% Promote business diversification among life, non-life and reinsurance, and geographical diversification of risks underwritten Kiln 17% Delphi 25% North America 3% 24
Ⅲ: Business Plan and Strategy by Domain 3-3. International Insurance Business Net Premiums Written (billions of yen, except for %) Adjusted Earnings Applied FX rate (USD/JPY) Original (a) Revised (b) YoY Original (a) Revised (b) As of end- As of end- As of end- Difference As of end- As of end- As of end- Dec. 2012 Mar. 2013 Sep. 2013 (b) - (a) Change % Dec. 2012 Mar. 2013 Sep. 2013 JPY 86.5 JPY 94.0 JPY 97.8 JPY 86.5 JPY 94.0 JPY 97.8 Difference (b) - (a) YoY Change % Philadelphia 193.6 226.0 241.0 15.0 47.4 24% 24.5 28.0 30.0 2.0 5.5 22% Delphi *1 75.2 171.0 180.0 9.0 104.8 139% 11.9 23.0 29.0 6.0 17.1 144% North America 48.7 56.0 60.0 4.0 11.3 23% 7.3 3.0 4.0 1.0-3.3-45% Kiln 106.8 118.0 123.0 5.0 16.2 15% 5.6 17.0 20.0 3.0 14.4 257% Europe & Middle East South & Central America 20.5 22.0 25.0 3.0 4.5 22% 2.2 1.0 0.0-1.0-2.2-79.7 96.0 105.0 9.0 25.3 32% 2.0 2.0 2.0 0.0 0.0 0% Asia 79.9 95.0 93.0-2.0 13.1 16% 2.2 6.0 17.0 11.0 14.8 673% Reinsurance 78.3 83.0 98.0 15.0 19.7 25% 10.2 12.0 13.0 1.0 2.8 27% Total Non-Life *2 683.0 864.0 925.0 61.0 242.0 35% 66.0 92.0 116.0 24.0 50.0 76% Life 51.3 56.0 67.0 11.0 15.7 31% 4.7 2.0 1.0-1.0-3.7-79% Total (After adjustment) *1 Delphi " " shows the results for six months from July to December 2012 and " " shows the full year projection from January to December 2013 *2 Total Non-Life figures include some life insurance premiums of composite subsidiaries 734.3 920.0 992.0 72.0 257.7 35% 69.2 90.0 115.0 25.0 45.8 66% 25
Ⅲ: Business Plan and Strategy by Domain 3-4. Sustainable Profit Expansion in Developed Countries Major Entities High financial rating Excellent marketing capability High financial rating Strong expertise in the field of employee benefits Strong expertise in asset management High financial rating Strong expertise in underwriting & product development Reinsurance High financial rating Sustainable and stable capacity Adjusted Earnings & C/R (billions of yen, except for %) 24.5 28 30 11.9 5.6 96.6% 92.1% 10.2 92.8% 88.4% (Original) approx. 91% 23 29 (Original) 17 (Original) approx. 95% approx. 79% approx. 87% (Revised) (Revised *2 ) 20 (Revised *3 ) 12 13 approx. 91% approx. 97% approx. 80% approx. 88% Growth Strategy Increase profitability and stability of profits by Dynamic Portfolio Optimization (DPO *1 ), continued rate increase and retention of renewal book Acquire new businesses by marketing new products *1 DPO: Strategy to optimize portfolio by identifying contracts with significant natural catastrophe risks and actively replace to improve terms and conditions Maintain strict underwriting discipline and stable profit growth Further increase profits by leveraging strong investment expertise Generate group synergy by promoting cooperation between various business companies within the group *2 Delphi's P/L was consolidated from FY12 2H (July-Dec.). Increase in FY13 is due to full-year profit contribution as well as revenue growth and an increase in investment income, etc. Maintain strict underwriting discipline and strong profits Construct well-balanced portfolio through various growth options Expand growth strategy in Europe and Asia *3 Increase in FY13 is mainly due to the reversal effect of natural catastrophe losses in FY12 and foreign exchange gains Maintain underwriting discipline in the softening market Stable profits by controlling natural catastrophe risks and portfolio diversification The re-domestication of head office to Switzerland and expansion of global strategy in Europe, U.S. and Oceania 26 (Original) (Revised)
Ⅲ: Business Plan and Strategy by Domain 3-5. Growth in Emerging Markets Key Strategies and Net Premiums Written in Emerging Countries (billions of yen) Asia Non-Life Asia Life South & Central America Non-Life 105 93 79.9 67 79.7 51.3 56.5 60.4 32.9 FY2011 Thailand Aim to increase profits by expanding underwriting in both Japanese and local businesses Singapore / Malaysia Maintain high profitability in marine business and personal auto insurance business India (Revised) Accelerate profit growth in both Japanese and local businesses Aim to achieve stable profits through revenue growth in auto insurance business China Maintain profitability in Japanese business and expand market share of local business in the medium-to-long term FY2011 (Revised) Continue to expand business by developing distribution channels Singapore / Malaysia Pillar of Asia life business. Aim to increase profit growth exceeding the market average by expanding distribution channels and developing new products Thailand Accelerate development of the main agency channel and increase profitability India Develop distribution channels and new products anticipating market growth in the medium-to-long term Indonesia Achieve full operational status quickly and strengthen distribution after entering the fastgrowing Indonesian life insurance market FY2011 Expand steadily in personal auto business Brazil Maintain high profitability in personal auto business utilizing the solid business platform Middle-East Islamic Insurance Develop Islamic insurance business Saudi Arabia / Egypt (Revised) Promote Islamic insurance products through the distribution network of Alinma Bank in Saudi Arabia Transformed Takaful companies (life and non-life) in Egypt into subsidiaries anticipating an increase in demand for Takaful products 27
Ⅲ. Business Plan and Strategy by Domain 1. Domestic Non-Life 2. Domestic Life 3. International Insurance 4. Asset Management 5. ERM & Return to Shareholders 28
Ⅲ: Business Plan and Strategy by Domain 4. Asset Management Group Asset Management Concept With asset and liability management (ALM) at the core, we aim to secure sufficient liquidity and profit Aim to enhance profitability within the range of risk tolerance while taking the characteristics of insurance liabilities into consideration and continuously ensuring liquidity and risk controls through ALM The impact of monetary easing and other factors has engendered change in the asset management environment. We will respond to such changes in a flexible manner, although we do not intend to change our Group s concept for asset management Asset Composition of Tokio Marine Holdings (Consolidated) (as of the end of 2Q ) Others : 2.4T Mainly tangible fixed assets and intangible fixed assets, etc. Cash and deposits: 0.4T Other securities : 2.1T Mainly assets in separate accounts held by Domestic Life (FL) 13.1% 2.4% Domestic bonds : 7.3T Domestic equities : 2.4T Mainly business-related equities held by Domestic Non-Life (TMNF) Monetary receivables bought : 0.8T Mainly absolute return investment & lending by Domestic Non-Life (TMNF) and overseas subsidiaries (Delphi etc.) 11.5% 11.5% 13.1% 4.4% 4.4% Total assets 18.8T 39.0% 39.0% Domestic government bonds (JGB): Approx. 6.4T Mainly bonds for the purpose of ALM by Domestic Life and Non-Life Foreign securities : 2.7T Mainly local country bonds held by overseas subsidiaries Loans: 0.3T 2.0% 14.4% 29
Ⅲ. Business Plan and Strategy by Domain 1. Domestic Non-Life 2. Domestic Life 3. International Insurance 4. Asset Management 5. ERM & Return to Shareholders 30
Ⅲ: Business Plan and Strategy by Domain 5-1. Enterprise Risk Management (ERM) Maintain financial soundness Balance risk and capital to maintain AA credit ratings Improve natural catastrophe risk management Ensure our financial base can withstand catastrophic risks Improve profitability Sustainable profit growth and improve capital efficiency Invest in new businesses to improve capital efficiency Improve the profitability of existing businesses Continue sales of business-related equities Control risk and capital in accordance with risk appetite* * Insurance risk control : Pursue sustainable growth, risk diversification (stabilization), and improvement of capital efficiency through global business expansion Investment risk control : Secure liquid assets and stable profits mainly through ALM Economic Solvency Ratio (ESR) 3.7T 124% 3.0T Factors Causing Change in Net Asset Value Rise in market share prices Contribution of 2Q FY13 adjusted earnings, etc Factors Causing Change in Risk Capital Rise in market share prices, etc. 4.1T 128% 3.2T <Impact of market changes on ESR> Interest rates: Limit impact from interest rate changes through strict ALM FX rates: Limited positive impact, as depreciation of the yen increases net asset value of overseas subsidiaries, but also increases FX risks Share price: Significant impact on ESR due to the market value fluctuation of business related equities Mar. 31, 2013 Sep. 30, 2013 As of Sep. 30, 2013 128% 12,397 yen Nikkei Stock Average 14,455 yen Net Asset Value: Consolidated net asset value + Various reserves (after-tax basis) + Value of life insurance policies in-force -Goodwill and other items Risk Capital: 99.95% VaR, after taking account of diversification effects ESR: Net asset value/risk capital Nikkei Stock Average: +30% 31-30% 118% 137%
Ⅲ: Business Plan and Strategy by Domain 5-2. Return to Shareholders Attractive dividends Flexible share repurchases The primary means of shareholder returns is dividends, which we plan to increase in line with profit growth The target payout ratio level is 40% to 50% of average adjusted earnings (excluding EV) Interim dividend of 30.0 per share ( 23.0B in total), in line with the original plan Annual dividend is planned to be raised by 5 to 60 ( 46.0B in total), an increase for two consecutive fiscal years Consistent with the past policy, we intend to conduct share repurchases in a flexible manner based on a comprehensive assessment of market conditions, our capital levels, business investment opportunities, and other relevant factors Expected trend for dividends per share : Dividends per share (yen) : Payout ratio *1 48 48 50 50 50 55 60 () 36 33% 39% 48% 46% 48% 48% 50% (billions of yen) 2006 2007 2008 2009 2010 2011 2012 2013 () 2014 Adjusted earnings 169.7 143.2-52.5 165.4 72.0-19.5 209.1 213.0 Adjusted earnings (excluding EV) 121.5 128.1 4.7 113.4 44.5-35.4 98.8 178.0 Average adjusted earnings (excluding EV) *2 90.0 100.0 80.0 85.0 80.0 80.0 85.0 110.0 Dividends Total 29.8 38.7 38.0 39.4 38.6 38.3 42.2 46.0 *1: Proportion to average adjusted earnings (excluding EV) *2: Average adjusted earnings (excluding EV) excludes effects from the Great East Japan Earthquake and Thai Flood 32
Reference 33
Reference Tokio Marine Holdings Key Statistics - 1 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 Ordinary income *1 2,929.0 bn yen 2,775.7 bn yen 2,899.4 bn yen 3,399.9 bn yen 4,218.5 bn yen 3,710.0 bn yen 3,503.1 bn yen 3,570.8 bn yen 3,288.6 bn yen 3,415.9 bn yen 3,857.7 bn yen - Net income 56.6 bn yen 111.4 bn yen 67.6 bn yen 89.9 bn yen 93.0 bn yen 108.7 bn yen 23.1 bn yen 128.4 bn yen 71.9 bn yen 6.0 bn yen 129.5 bn yen 185.0 bn yen Adjusted earnings *2 105.0 bn yen 172.1 bn yen 51.8 bn yen 138.7 bn yen 169.7 bn yen 143.2 bn yen -52.5 bn yen 165.4 bn yen 72.0 bn yen -19.5 bn yen 209.1 bn yen 213.0 bn yen Adjusted ROE *2 3.8% 5.9% 1.6% 3.7% 3.8% 3.5% -1.7% 5.8% 2.4% -0.7% 6.7% 6.0% Dividends total *3 18.5 bn yen 19.7 bn yen 18.9 bn yen 25.2 bn yen 29.8 bn yen 38.7 bn yen 38.0 bn yen 39.4 bn yen 38.6 bn yen 38.3 bn yen 42.2 bn yen 46.0 bn yen Dividends per share *4 20 yen 22 yen 22 yen 30 yen 36 yen 48 yen 48 yen 50 yen 50 yen 50 yen 55 yen 60 yen Share repurchase *5-100.0 bn yen 92.4 bn yen 70.1 bn yen 85.0 bn yen 90.0 bn yen 50.0 bn yen - 50.0 bn yen - - TBD Sales of business related equity holdings 260.0 bn yen 130.0 bn yen 170.0 bn yen 120.0 bn yen 45.0 bn yen 60.0 bn yen 50.0 bn yen 95.0 bn yen 187.0 bn yen 206.0 bn yen 115.0 bn yen approx. 100.0 bn yen Share price *6 1,472 yen 3,240 yen 3,120 yen 4,660 yen 4,360 yen 3,680 yen 2,395 yen 2,633 yen 2,224 yen 2,271 yen 2,650 yen 3,290 yen Market capitalization *6 1,363.0 bn yen 2,896.6 bn yen 2,683.2 bn yen 3,930.8 bn yen 3,594.9 bn yen 2,960.6 bn yen 1,926.8 bn yen 2,118.3 bn yen 1,789.3 bn yen 1,827.1 bn yen 2,039.2 bn yen 2,531.7 bn yen *1 Ordinary income projections are undisclosed *2 FY2005: excludes the effects of assumption changes in calculating EV of domestic life, etc. *3 : projected figure assumes the number of stocks unchanged from that of March 31, 2013 *4 All figures are shown on a basis after a share-split 1-500 in Sep. 2006 *5 On a repurchase year basis. FY2006 figure excludes \57.8B of stock exchange between Nisshin Fire *6 figures are as of November 12, 2013. Share prices are shown as a basis after a share-split 1-500 in Sep. 2006 34
Reference Tokio Marine Holdings Key Statistics - 2 Adjusted Earnings / Adjusted Earnings (excluding EV) and Return to Shareholders Adjusted earnings (billions of yen, unless otherwise stated below) FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 () 138.7 169.7 143.2-52.5 165.4 72.0-19.5 209.1 213.0 Adjusted earnings (excluding EV) Average adjusted earnings (excluding EV) *1 Total distributions to shareholders 104.1 121.5 128.1 4.7 113.4 44.5-35.4 98.8 178.0 90.0 90.0 100.0 80.0 85.0 80.0 80.0 85.0 110.0 95.3 114.8 128.7 88.0 39.4 88.6 38.3 42.2 TBD Dividends total 25.2 29.8 38.7 38.0 39.4 38.6 38.3 42.2 46.0 Dividends per share 30 yen 36 yen 48 yen 48 yen 50 yen 50 yen 50 yen 55 yen 60 yen Payout ratio to average adjusted earnings (excluding EV) 28% 33% 39% 48% 46% 48% 48% 50% 42% Share repurchases* 2 70.1 85.0 90.0 50.0-50.0 - - TBD *1: Average adjusted earnings (excluding EV) excludes effects from the Great East Japan Earthquake and Thai Flood *2: On a repurchase year basis. FY2006 figure excludes \57.8B of stock exchange between Nisshin Fire BPS and PBR of Tokio Marine Holdings Adjusted number of issued and outstanding shares (thousands of shares) Share price (yen) Percentage change (Reference) TOPIX Percentage change Shareholders' equity after tax on a financial accounting basis (billions of yen) BPS on a financial accounting basis (yen) PBR on a financial accounting basis 2006/3E 2007/3E 2008/3E 2009/3E 2010/3E 2011/3E 2012/3E 2013/3E 2013/9E 840,234 823,337 802,231 787,562 787,605 766,820 766,928 767,034 767,240 4,660 4,360 3,680 2,395 2,633 2,224 2,271 2,650 3,205 49.4% - 6.4% - 15.6% - 34.9% 9.9% - 15.5% 2.1% 16.7% 20.9% 1,728.16 1,713.61 1,212.96 773.66 978.81 869.38 854.35 1,034.71 1,194.10 46.2% - 0.8% - 29.2% - 36.2% 26.5% - 11.2% - 1.7% 21.1% 15.4% 3,209.8 3,398.4 2,563.5 1,627.8 2,169.0 1,886.5 1,839.6 2,340.7 2,624.3 3,820 4,128 3,195 2,067 2,754 2,460 2,399 3,052 3,420 1.22 1.06 1.15 1.16 0.96 0.90 0.95 0.87 0.94 Adjusted capital (billions of yen) 4,238.7 4,585.8 3,605.9 2,564.2 3,160.8 2,918.3 2,829.9 3,417.3 3,712.6 BPS on an adjusted basis (yen) 5,040 5,570 4,490 3,260 4,010 3,810 3,690 4,460 4,840 PBR on an adjusted basis 0.92 0.78 0.82 0.73 0.66 0.58 0.62 0.59 0.66 35
Reference Factors of Change in Adjusted Capital (billions of yen) + 108.0 + 109.2-26.4 + 14.7 + 19.3 3,712.6 686.1 402.1 Reserves of capital nature Value of in-force policies in life insurance business 3,417.3 + 91.4 1,323.7 Accumulated other comprehensive income - 21.0 Items of net assets Adjustment items 1,300.6 Shareholders' equity Adjusted capital as of 3/E 2013 Dividends Net income Unrealized gains on securities, net of taxes Foreign currency translation adjustments Others Value of in-force policies in life insurance business Reserves of capital nature (after tax) Adjusted capital as of 9/E 2013 36
Reference Impact of FX Rate Change on the Group's Financial Main impact in the event of 1 yen depreciation *1 (estimate) Impact on P/L 1. Increase in profit from overseas subsidiaries converted into yen : approx. +1.0B *2 2. Change in reserves for foreign currency denominated outstanding claims and derivatives at TMNF approx. - 1.7B *2 Impact on B/S Increase in yen based net asset value of overseas subsidiaries : approx. +10.0B Regarding No.2 in the left column, due to the simultaneous change in value of the matching foreign currency denominated assets and hedged assets, impact to the Group's net asset value is basically neutral *1: Assuming that the FX rate for each currency changes by the same ratio as USD *2: After tax basis Reference (applied FX rate) FX rate (USD/JPY) (Original) 2Q (Revised) Overseas subsidiaries JPY 86.58 (end-dec. 2012) JPY94.05 JPY 98.59 (end-jun. 2013) JPY97.75 TMNF JPY 94.05 (end-mar. 2013) (end-mar. 2013) JPY 97.75 (end-sep. 2013) (end-sep. 2013) 37
Reference Asset Management - Asset Portfolio Domestic Non-Life (TMNF) Domestic Life (TMNL) With regard to "long-term insurance liabilities," we aim to maximize the value of surplus by controlling the interest rate risk based on the principle of strict ALM investments With regard to "Absolute return investment and lending," we work toward diversification of investments with appropriate risk control, in order to maximize net asset value and increase investment income TMNF Total Assets 8.5T (as of Sep. 30, 2013) Most assets are assets for backing long-term insurance liabilities. We aim to maximize the value of surplus by controlling the interest rate risk based on the principle of strict ALM investments TMNL Total Assets 4.7T (as of Sep. 30, 2013) Assets backing long-term insurance liabilities Mainly yen-denominated fixed income assets Appropriately control the yendenominated interest rate risks of longterm insurance liabilities including deposit-type insurance, with yendenominated fixed income assets 31% 14% Absolute return investment and lending (Including short-term investments) Carefully select investment targets from domestic and foreign bonds, etc. and aim for profit contribution Business-related equities Continue to reduce holdings Assets backing long-term insurance liabilities Appropriately control interest rate risks of life insurance liability Investments in subsidiaries and affiliates 28% 13% Others 14% Real estate for own use and non-investment assets Mainly yen-denominated fixed income assets (Including part of foreign securities backing foreign currency denominated insurance liabilities) 38 Other 87% 13% Short-term investments, etc.
Reference Asset Management - Status of Investments Status of Investments in Bonds of European Countries (Sum of major subsidiaries (domestic and overseas) as of the end of 2Q 2013) Sovereign bonds (billions of yen) Other (Corporate bonds, etc.) European countries total 134.1 132.2 (Five countries*) 2.9 7.0 *Heavily-indebted European countries which are Portugal, Ireland, Italy, Greece, and Spain Status of Investments in Securitized Products (Sum of major subsidiaries (domestic and overseas) as of the end of 2Q 2013) (billions of yen) As of the end of 2Q 2013 *1 Domestic Offices Overseas Offices CDS 39.9 39.9 - AAA - - - AA - - - A - - - BBB 39.9 39.9 - Other than above - - - ABS (Securitized products) 501.7 48.1 453.5 Agency MBS *2 158.5 19.1 139.3 AAA 81.3 27.6 53.7 AA 18.1-18.1 A 27.4 1.0 26.4 BBB 42.7-42.6 Other than above 173.5 0.2 173.2 Total 541.7 88.1 453.5 Financial guarantee reinsurance (relating to securitized products) 162.5 162.5 - *1 CDS: Notional value ABS: Market value Financial guarantee reinsurance: Par outstanding *2 Agency MBS: MBS by Fannie Mae, Freddie Mac, and Ginnie Mae 39
Reference 2Q Adjusted Earnings (Group Total) Adjusted Earnings by Business Domain Business Domain 2Q TMNF Adjusted Earnings 2Q (billions of yen) Gains/loses on Net income of Provision of Provision for Gains/losses on sales or Other extraordinary sales or evaluation Adjusted TMNF for catastrophe price fluctuation evaluation of profits/losses and + + - of ALM bonds and - - = earnings of accounting reserves, etc. net reserves, net of stocks and valuation reserves interest rate swaps, purposes of taxes taxes net of taxes properties held, etc., net of taxes TMNF net of taxes 69.7B 16.2B 1.2B 9.7B 25.4B 20.0B 32.0B Change Domestic Non-Life 26.4 33.6 7.1 TMNF 30.8 32.0 1.2 NF -1.8 3.5 5.3 Other -2.5-1.9 0.5 Domestic Life *1, 2 16.4 0.6-15.8 TMNL 24.5-5.0-29.6 FL -7.6 5.9 13.5 Other -0.4-0.2 0.2 International Insurance 28.3 71.0 42.7 PHLY 10.6 16.4 5.8 Delphi - 17.2 17.2 North America 2.5 1.2-1.3 Kiln 5.6 10.2 4.6 Europe & Middle East 0.7 0.7 0.0 South & Central America 0.7 1.0 0.3 Asia 1.3 15.4 14.1 Reinsurance 5.8 7.2 1.4 International Non-Life *3 26.9 71.0 44.0 International Life 1.7 0.7-0.9 Financial & General 2.1 2.8 0.7 Group Total 73.3 108.2 34.8 *1: Excluding capital transactions *2: Simplified calculation method is applied for EV as of end of Sept. 2012 and as of end of Sept. 2013. The calculation is an unaudited basis *3: International Non-Life figures include some life insurance premiums of composite overseas subsidiaries Group total adjusted earnings increased by 34.8B YoY to 108.2B Excluding the effect of risk discount rate change used for calculation of EV ( - 41.6B), group total adjusted earnings increased by 76.5B YoY to 149.8B Domestic Non-Life TMNF: Increased by 1.2B YoY to 32.0B Decrease in natural catastrophe losses Improvement in underwriting results in fire and auto Increase in i) provision for reserves for foreign currency denominated outstanding claims, ii) losses on hedging foreign currencies, due to the yen turning to depreciation, iii) others Domestic Life TMNL: Decreased by 29.6B YoY to - 5.0B Increase in EV due to a steady increase in new policies Decrease in EV due to changes in risk discount rate, etc. FL: Increased by 13.5B YoY to 5.9B Increase in EV due to the improvement of the investment environment, etc. International Insurance Increased by 42.7B YoY to 71.0B New contribution from Delphi's consolidation Decrease in outstanding claims reserves in Asia relating to Thai Flood occurred in FY2011, among others 40
Reference Consolidated Overview (2Q ) 2Q (billions of yen, except for %) 2Q Change YoY Premiums income (TMHD Consolidated) 1,432.2 1,583.4 + 151.2 + 10.6% Net premiums written 1,251.1 1,415.0 + 163.9 + 13.1% TMNF 929.7 971.2 + 41.5 + 4.5% NF 69.6 69.1-0.5-0.8% Life insurance premiums 181.0 168.3-12.7-7.0% TMNL (Insurance premiums and other) 257.3 294.2 + 36.8 + 14.3% Ordinary profit (TMHD Consolidated) 82.9 148.6 + 65.7 + 79.3% TMNF 52.7 107.6 + 54.9 + 104.3% NF - 0.5 3.8 + 4.3 - TMNL 12.0 8.3-3.7-30.9% FL - 3.5-0.3 + 3.2 - Overseas subsidiaries 40.5 92.3 + 51.8 + 128.0% Financial and general 2.1 3.0 + 0.8 + 41.2% Others (Elimination, etc.) - 20.3-66.1-45.8 Net income (TMHD Consolidated) 62.5 91.4 + 28.8 + 46.2% TMNF 44.7 69.7 + 24.9 + 55.7% NF 0.0 2.5 + 2.4 + 2,638.6% TMNL 7.5 5.0-2.4-32.6% FL - 5.4-0.3 + 5.1 - Overseas subsidiaries 32.7 76.4 + 43.7 + 133.5% Financial and general 1.2 2.0 + 0.8 + 64.7% Others (Elimination, etc.) - 18.3-64.0-45.6 Premiums Income (Net premiums written + Life insurance premiums) Net premiums written: Increased due to revenue growth in domestic non-life business centering in auto and steady growth at overseas subsidiaries and the new contribution from Delphi's consolidation, as well as the depreciation of the yen, etc. Life insurance premiums: Decreased mainly due to an increase in surrender benefits and other refunds at FL associated with the recovery of the domestic stock market, despite the following increase factors: i. Increase in in-force policies at TMNL ii. Favorable sales in Asia (ex-japan) iii. New contribution from Delphi's consolidation Ordinary Profit TMNF: Increased due to an increase in investment income despite the following decrease factors in underwriting profit: i. Decrease in reversal of catastrophe loss reserves ii. Increase in provision for reserves for foreign currency denominated outstanding claims due to the yen turning to depreciation Overseas Subsidiaries: Increased mainly due to: i. Revenue growth at each entities ii. New contribution from Delphi's consolidation iii. Depreciation of the yen Interim Net Income Increased due to the same factors as in ordinary profit, despite the reversal effect of extraordinary gains in at TMNF 41
Reference Consolidated Overview ( Revised Full-Year ) Original (billions of yen) Revised Difference Premiums income (TMHD Consolidated) 2,957.8 3,170.0 3,240.0 + 70.0 Net premiums written 2,558.0 2,710.0 2,800.0 + 90.0 TMNF 1,869.6 1,911.0 1,947.0 + 36.0 NF 138.7 138.5 137.9-0.6 Life insurance premiums 399.8 460.0 440.0-20.0 TMNL 566.5 619.9 632.6 + 12.7 Ordinary profit (TMHD Consolidated) 207.4 270.0 285.0 + 15.0 TMNF 156.1 209.0 194.0-15.0 NF 4.5 4.3 5.5 + 1.2 TMNL 22.6 11.6 15.5 + 3.9 FL - 0.7-5.8 2.6 + 8.4 Overseas subsidiaries 97.3 115.2 141.8 + 26.6 Financial and general - 17.9 3.8 3.9 + 0.1 Others (Elimination, etc.) - 54.6-68.1-78.3-10.2 Net income (TMHD Consolidated) 129.5 170.0 185.0 + 15.0 TMNF 58.6 137.0 130.0-7.0 NF 2.6 2.6 3.4 + 0.8 TMNL 13.9 7.1 9.8 + 2.7 FL - 2.6-5.8 2.6 + 8.4 Overseas subsidiaries 80.4 95.9 113.6 + 17.7 Financial and general - 20.0 2.3 2.4 + 0.1 Others (Elimination, etc.) - 3.4-69.1-76.8-7.7 Premiums Income (Net premiums written + Life insurance premiums) Net premiums written: Upward revision mainly due to favorable first-half results in domestic non-life centering in auto, in addition to the positive impact from the depreciation of the yen at overseas subsidiaries Life insurance premiums: Downward revision due to an increase in surrender benefits and other refunds at FL associated with the recovery of the domestic stock market Ordinary Profit TMNF: Downward revision mainly due to: i. Decrease in reversal of catastrophe loss reserves due to the carry-over of claims payment relating to natural catastrophes occurred in previous fiscal years, to FY2014 ii. Increase in provision for reserves for foreign currency denominated outstanding claims due to the depreciation of the yen FL: Upward revision mainly due to expected reversal of additional provision for underwriting reserves in accordance with improvement of the investment environment Overseas Subsidiaries: Upward revision mainly due to the favorable business results at present and further depreciation of the yen Net Income Upward revision due to the same factors as in ordinary profit 42
Reference Mid-Term Business Plan "Innovation and Execution 2014" Overview Expand Profit Improve the combined ratio in our domestic non-life insurance business Sustainable growth in the domestic life insurance and international insurance businesses Seize new growth opportunities by investing in new businesses Improve Capital Efficiency Continue reducing the risks associated with business-related equities Invest in businesses with high capital efficiency Enhance global diversification of risk Achieve an appropriate level of capital via dividends and flexible repurchases of shares Improve and expand the profitability of existing businesses Continue reducing the risks associated with business-related equities Improve capital efficiency by globally diversifying our business portfolio Enterprise Risk Management (ERM) Generate capital and cash Drive new growth and enhance capital efficiency by investing in new businesses Achieve an appropriate level of capital via dividends and flexible repurchases of shares Mid- to Long- Term Vision A global insurance group sustaining growth by offering quality that customers select 43
Reference Mid-Term Business Plan Plan for Achieving the Target Combined Ratio (TMNF) Improve profitability to achieve a combined ratio ("C/R") at a 95% level by FY2014 (Private insurance basis) FY2011 C/R :103.3% FY2014 C/R :95% Improve operational efficiency and achieve premium growth Improvement of underwriting Factors relating to natural catastrophes -1.0% C/R -2.0% C/R -5.0%~-6.0% C/R Lowering corporate expenses Revising the agency commission points Achieve steady premium growth by enhancing the sales force Improving profitability mainly through product and rate revisions Assuming negative factors in development of grade discounts and the depreciation of insured automobiles Implementing additional measures in a timely and effective manner in response to the underwriting results in auto Assuming of an average level of losses related to natural catastrophes Conservative assumptions as to the level of natural catastrophe-related losses and reinsurance costs in light of the increase of natural disasters 44
Reference Mid-Term Business Plan Objectives in the Mid-Term Business Plan (TMNL) Target an aggregate Adjusted Earnings (EV increase) of 180B * *excluding capital transactions Fiscal Year-end EV (billions of yen) 516.3 601.1 CAGR approx. 10% 656.8 619.2 approx. 700 EV increase 180* Annualized Premiums (billions of yen) New Policies 49.6 50.7 57.3 80.6 81.0 91.3 390.6 439.8 FY2009 FY2010 FY2011 FY2014 (Outlook) (Original) (Revised) In-force Policies 382.5 396.7 419.4 470.4 518.4 527.5 FY2009 FY2010 FY2011 (Original) (Revised) FY2014 (Target) FY2009 FY2010 FY2011 FY2014 (Outlook) (Original) (Revised) 45
Reference Mid-Term Business Plan Objectives in the Mid-Term Business Plan (International Insurance Business) Adjusted Earnings (billions of yen) Business and Geographical Portfolio Breakdown 90.0 115.0 100.0 (Adjusted Earnings basis) Kiln 18% Asia Life 4% Reinsurance 12% Reinsurance approx. 17% Life approx. 14% Delphi 19% 76.5 52.7 *1 *2 55.0 69.2 Asia Non-life 8% Non-Life Primary approx. 69% South & Central America 4% Europe & Middle East Other 1% North America 6% Philadelphia 28% 12% 6% FY2014 Target 100.0B 24.8 18% Life approx. Reinsurance 6% approx. 18% FY2009 FY2010-11.9 FY2011 FY2014 (Target) (Original) (Revised) 10% 2% Non-Life Primary approx. 76% 9% 43% FY2010 *1 52.7B *1: Average-level adjusted earnings excluding extraordinary factors (adjustment relating to 27.9B natural catastrophe loss incurred in 1Q FY2011) *2: Average-level adjusted earnings excluding the excess loss of the forecast from natural catastrophes such as Thai Flood 46