Ladies and gentlemen, esteemed investors and analysts, thank you very much for taking time out of your busy schedules to join today's earnings conference call for MS&AD Insurance Group Holdings, Inc. My name is Hayashi from the investor relations department, and I will be serving as the moderator for this session. Appreciate your kind attention and look forward to your participation. Today, in addition to myself, Hayashi, we are joined by Mr. Nakayama, General Manager of Accounting, as well as members from the investor relations and accounting department.
The presentation materials are available on our company's website under the investor section, specifically in the IR events area, listed alongside the earnings release and the other related disclosures for the fiscal 2025 full year results. Please have these materials at hand as we proceed. Please note that the results for fiscal year 2025 are presented in accordance with Japanese accounting standards, while the forecasts for the fiscal year 2026 are based on IFRS. As with our previous conference calls, we have included a summary of today's presentation in the materials.
Therefore, at the outset, I will focus only on the key points, and we will dedicate most of the session to the Q&A. We aim to conclude the entire meeting in approximately 45 minutes, and we appreciate your understanding. Furthermore, please be aware that today's presentation may include forward-looking statements based on our current forecasts. Such statements are subject to risks and uncertainties, and actual results may differ materially from these projections. We kindly ask for your understanding in this regard. Now, let me briefly outline the key points of our financial results.
The key highlights for today are shown on page four of the presentation materials. For the full fiscal year 2025, consolidated net income reached a record high of JPY 787.3 billion, an increase of JPY 95.6 billion from the previous year. Group adjusted profit, which serves as the basis for shareholder returns, also marked a record at JPY 1,000.9 billion, up JPY 269.1 billion year-on-year. Let me begin with an overview of our full-year results for fiscal 2025, starting with the top-line figures. Please turn to page 11 of the presentation materials. Net premiums written at our domestic non-life insurance businesses increased by JPY 122.6 billion year-on-year, reaching JPY 3,269.6 billion.
This growth was mainly driven by higher revenues in automobile and fire insurance, reflecting the impact of rate revisions. Premium income from our domestic life insurance business increased by JPY 100.6 billion, reaching JPY 1,741 billion. This growth was primarily driven by higher sales at Mitsui Sumitomo Primary Life Insurance following product revisions. Net premiums written by our overseas subsidiaries rose by JPY 207.8 billion year-on-year to JPY 1,735.1 billion. This increase was driven by revenue growth across all regions, with particularly strong performance in the Americas and Europe.
Next, I will discuss our profit on a financial accounting basis. Please refer to page 12 of the presentation materials. Consolidated net income for our two domestic non-life insurance companies increased by JPY 49.3 billion, despite the burden of merger-related expenses. This growth was mainly driven by higher premium income, a decrease in natural catastrophe losses, and increased dividend and interest income. In the domestic life insurance business, net income decreased by JPY 74.9 billion year-on-year.
This was mainly due to Mitsui Sumitomo Aioi Life Insurance reporting a loss of JPY 51.9 billion as the company proceeded with the sale of yen-denominated loans in its available-for-sale securities portfolio to eliminate unrealized losses. Our overseas insurance subsidiaries recorded an increase in profit of JPY 77.4 billion, mainly attributable to higher revenues in Europe and the Americas, as well as a decrease in natural catastrophe losses.
Please turn to page 13 for details on the Group Adjusted Profit. Driven by significant profit growth in both our domestic non-life insurance and international businesses, Group Adjusted Profit increased by JPY 269.1 billion year-on-year, reaching a record JPY 1,000.9 billion. Next, please refer to page 17 for an update on our ESR. As of the end of March 2026, ESR declined by 12 points from the previous fiscal year, standing at 214%. Now, let me move on to our earnings forecast for fiscal year 2026.
As announced in our news release dated March 30th, the company will voluntarily adopt IFRS for its consolidated financial statements, starting with the securities report for the fiscal year ended March 2026. Accordingly, please note that our earnings forecast for fiscal year 2026 are based on IFRS. Before presenting our earnings forecast for fiscal year 2026, let me first explain our fiscal 2025 results on an IFRS basis, which will serve as the basis for comparison. Please turn to page 14. While Group Adjusted Profit under Japanese accounting standards was JPY 1,000.9 billion, adjusted profit on an IFRS basis was JPY 918.9 billion.
This difference was mainly due to the recognition of losses on onerous contracts in the domestic non-life insurance business, and the impact of eliminating timing differences resulting from the alignment of fiscal year-ends in overseas operations. Now, let me explain our earnings forecast for fiscal year 2026. Please refer to page 30 of the presentation material. As illustrated in this waterfall chart, we are forecasting adjusted profit of JPY 800 billion for the fiscal year ending March 2027.
Excluding gains and losses from the sale of strategic equity holdings, we predict adjusted profit from the domestic non-life insurance businesses to be JPY 170 billion, roughly in line with the previous year. This reflects our expectation of increased revenue offset by a projected rise in natural catastrophe losses. For the domestic life insurance business, we expect adjusted profit to be JPY 52 billion, also roughly unchanged from the previous year. The positive impact from the absence of Mitsui Sumitomo Aioi Life Insurance's bond sales losses is expected to be mostly offset by a decline in investment margins at Mitsui Sumitomo Primary Life Insurance.
For our international businesses, we are projecting adjusted profit of JPY 300 billion, an increase of approximately JPY 4 billion year-on-year. While we anticipate natural catastrophe losses in Europe to be in line with the historical average and have factored in the absence of gains from the sale of shares in Challenger Limited in our overseas life insurance operations, we expect profit growth in the Americas, primarily driven by equity in earnings from W. R. Berkley Corporation. On balance, these factors result in a modest increase for the segment as a whole.
On a consolidated group basis, excluding gain from the sale of strategic equity holdings, we expect adjusted profit to be JPY 532 billion, remaining at the same level as the previous year. This forecast reflects the positive effects on ongoing initiatives such as rate revisions, while assuming natural catastrophe losses both in Japan and overseas will be in line with historical averages. Finally, let me address our policy on shareholder return.
Page eight, please. For fiscal year 2025, in addition to the interim dividend of JPY 77.5 per share already paid, we will pay a year-end dividend of JPY 82.5 per share. This brings the total dividend to JPY 160 per share, representing an increase of JPY 15 compared to the previous fiscal year and JPY 5 compared to our initial forecast. In addition, we have decided to repurchase shares up to a maximum JPY 265 billion as part of our basic shareholder return policy, of which JPY 75 billion has already been executed.
Furthermore, for fiscal year 2026, we project an annual dividend of JPY 170 per share, which represents an increase of JPY 10 from the previous year. In addition to this, we plan to repurchase JPY 80 billion of our own shares during the first half as part of our basic shareholder return, and combined with JPY 190 billion linked to the previous year's results, we intend to repurchase a total of JPY 270 billion worth of shares in fiscal year 2026.
I would also like to note that our growth strategy, as well as topics such as the reduction of strategic equity holdings, will be addressed in greater detail by management at the information meeting scheduled for next week on May 26. That concludes my remarks. We will now begin the Q&A session. First of all, Sato-san, JP Morgan Securities, please.
This is Sato from JP Morgan. I have two questions. My first question is about international, especially MS Amlin and MS Re. The impact of the historical avalanche. There I'd like to learn about the attritional loss, the project excluding natural catastrophe, and I also would like to learn about the impact of the market softening. My second question, you have updated your midterm management plan, and I think basically it is in line with what you have disclosed at information meeting. However, I'd like to learn about the points you have revised. Thank you.
Mr. Sato, thank you very much for your question. I'd like to double-check your questions. Your first question was about Europe, especially MS Amlin and MS Re, excluding natural catastrophe. So what's the projection of attritional loss, and also what's the impact of market softening? Your second question was about whether we have revised our mid-term management plan, and if so, what are the points we have revised.
This is Nakayama from accounting. Thank you very much. From myself, I'd like to address your first question. Regarding MS Amlin, FY 2026 earning forecast, which is on page 50 and 51, we do have the earnings forecast of MS Amlin and MS Re. Starting from this time, as we have moved to IFRS for overseas subsidiaries, we are based on April to March. Regarding the previous year's number, the number of FY 2025, it is also translated into April to March numbers.
That is why we do have some discrepancy with J-GAAP-based numbers, which we do have at the later part of the presentation. Again, this is April to March basis. When you look at loss ratio on page 50 for MS Amlin, it changed from 53.7%- 59.1%. Excluding natural catastrophe for MS Amlin, it was 1 point improvement. On the other hand, regarding MS Re, if you refer to page 51, loss ratio has increased from 71%- 77.5%. Excluding natural catastrophe, it was 3.7 point increase, so it was increased.
There is the impact of market softening as well, so that we have already incorporated the impact into these numbers. Excluding natural catastrophe for MS Re, it was 3.7 point, which looks actually bigger. However, there is the discount impact for IFRS. For FY 2025, discount impact was bigger, and also for FY 2026, it is smaller. That is why it looks like it has increased. That's all from myself.
For your second question, this is Hayashi. I'm going to address your question. Today, at the timing of financial results announcement, we have presented our management plan. Last November, we have presented a 2030 pre-profit target based on IFRS, we have presented JPY 764 billion. Now we do have the higher possibility to achieve this target for 2030 targets. Even though we have presented it as JPY 700 billion, now that we have increased the number to JPY 800 billion. For other parts, including initiatives, we really haven't made major revisions.
Understood. Regarding my first question, the impact of market softening, according to what you have said regarding MS Amlin, it's improving. Also for MS Re, there is the bigger the impact of the fluctuation. Even though there is the impact of market softening, however, you have been successfully managing that. Is that okay? Do you understand that way?
Yes.
Thank you.
Mr. Sato, thank you very much. Mr. Muraki from SMBC Nikko Securities, please.
This is Masao from SMBC Nikko Securities. I have two questions. My first question is regarding the projection of the auto on the insurance, and how do you see the necessity to increase the premium? On page 21, there's a number based on Japanese standard. However, with IFRS, there's a projection of a 2 point improvement for automobiles, and I would like to learn more about the projection. That is my first question. My second question, how we should see top-line growth of MS Re and also the American company.
I think MS Re had a 15% growth of top line last year. Also based on IFRS for the coming fiscal, the 15% growth is projected. However, there's a company such as Munich Re, which gets higher impact of market softening, and also they are experiencing reduction of revenues as well. My understanding is that you are strengthening your American base. However, there's still the growth of top line in some companies. So there are some companies which are not really growing. However, I was wondering how I should interpret the two digit top-line growth.
Let me confirm your question. Your first question was about FY 2026 on the auto insurance projection, and your second question was about MS Re and also the America top-line growth.
Regarding your first question, this is Nakayama speaking. Regarding FY 2026 automobile projection, I would like you to refer to page 38. As Muraki mentioned, we are projecting a 2% improvement. Excluding natural catastrophes, there is the 4-point improvement. As you may understand from P&L, where there is the impact from onerous contracts, that is why we are projecting a slight improvement. We have been working on rate revisions. When we have apple-to-apple comparison, still, we are projecting improvement. Regarding rate revisions, I'd like to ask Hayashi to answer that point.
Regarding rate revisions, at this point in time, we have nothing finalized. However, as we have been explaining to you, for the ratio we would like to achieve, we still have several things to consider.
May I move on to the next point? Regarding page 38, loss ratio based on IFRS. There is the loss from the onerous contract of FY 2025. Are you saying that is going to decrease in the coming fiscal?
Regarding onerous contract, there is the change of the estimate. However, for this time already in my answer, I included the natural catastrophe and also the onerous contract. However, still, we are projecting the improvement of the auto. So you can understand that it is improving even based on our traditional Japanese base standard.
Let me move on to the second question, which is related to the top line. In 2026, the guidance is available on page 49 for our international business. As you are aware of Europe, we're expecting JPY 169.9 billion revenue increase, which does include MS Re. Americas, JPY 155.5 billion revenue increase, is including the United States. MS Re, as Muraki is aware of, over the past several years, has been able to keep growing the business although the market has been softening. [inaudible] these reinsurance companies, they are directly affected by the softening situation.
Their top line has been affected, but I think these reinsurance companies, these major size companies, their portfolios are being matured, I will say. Our business, MS Re, they are still under development. So the phases are different. Under such a circumstance, we can refer to the rate, and we can choose the classes of alliance with who are not facing softening situation. With that, we are aiming to further grow our business.
So we've been growing till now, and even as of today, we are expecting to further grow our business. Reinsurance customers, we have been able to maintain good relationships. That should be also enabling us to reach out to attractive contracts. That's another reason why we've been able to grow. We're not competing based on pricing. That's not the case. The Americas. The Americas, yes, our top line is growing. This JPY 155.5 billion number is there. 2026 top line growth is affected a lot by the foreign currency exchange situation.
If you look at page 49, close to JPY 400 billion top line is growing, out of which foreign currency impact is equivalent to JPY 160 billion, which is included in this JPY 400 billion number. If you do the math, maybe the actual growth is JPY 240 billion. As you know, if we switch over to IFRS, the ordinary profit is going to be gross profit based. Since we have a front retail business in the U.S., and they are going to enhance the new program. On a gross basis, it may seem we are expanding a lot, but in terms of actual underwriting, the premiums written, not necessarily. Top line growth you see on page 49. Again, that is incorporating foreign currency positive impact. That's it.
Fully understood. Thank you.
Thank you very much, Mr. Muraki. Next, Mizuho Securities, Sakamaki-san, please.
I am Sakamaki from Mizuho. My question is about your guidance. I have two questions. First, page 30, waterfall chart, international business. Europe, Americas, life insurance. If you do the math, I don't think the number makes JPY 3.9 billion. What are the other factors that you've taken into consideration? The Americas WRB, what kind of contribution you're expecting, and what is the organic growth you're expecting? My second question is about natural catastrophe impact. The accounting is going to be different, so it may be difficult to compare, but you are increasing your budget in Japan, and maybe you are downsizing your budget in overseas. Am I correct?
Let us double-check your questions. First is about page 30, waterfall chart. The difference in the numbers for our overseas international business and W. R. Berkley contribution. That was your first part of your question. The second part is the impact coming from natural catastrophes, especially in the overseas markets. Mr. Nakayama will answer to the question.
If you compare 2025 and 2026 on page 30, the difference is JPY 3.9 billion. If you also look at page 48, you will see numbers by region. Americas JPY 65.5 billion, international life insurance JPY 27.5 billion. We also have Asia JPY - 3.2 billion, and other adjustments, which is JPY - 17.3 billion. That should be the breakdown of the numbers. I hope I could answer to your question.
All right. I was missing this page 48. Thank you. Next, let us know about the W. R. Berkley situation.
WRB, if you look at page 48, the Americas JPY + 65.5 billion is including the equity method profits coming from W. R. Berkley as well. This is a listed company, SEC, so we cannot mention the specific numbers. But again, certain number out of this JPY 65.5 billion is coming from W. R. Berkley. Again, they are listed in SEC, so there is market consensus number available. We do not have any internal full numbers, so we are based on the market consensus. I think we are incorporating 15% of the market consensus, I think. I hope I could answer your question.
Yes, thank you.
Natural catastrophe. The prerequisites, if you look at slide number 28, you will find left-hand table. Domestic, JPY 150 billion. Last year, JPY 124.7 billion. So we are expecting kind of a negative rebound following the previous fiscal year. Overseas, we are expecting JPY 64 billion for natural catastrophe. Last year, JPY 54.2 billion. We are not being optimistic or under-evaluating the situation. We are just incorporating expected average situation.
When you switch over to IFRS basis, what is going to be the average year basis? Compared to J-GAAP average year for domestic business, can we expect the average base to be the same? Thank you.
Well, shifting to IFRS natural catastrophe assumption, we are not revisiting. So basically, the definition remains the same. Effectively speaking, IFRS, are we going to do some discount or is it going to be growth basis? What kind of risk factors? Theoretically speaking, these details may need to be considered. But we are talking about natural catastrophe. It is not something we can adjust.
So the definition is going to be the same. It is going to be net basis, Japan base, and we are just handling or treating the same as before. Of course, the bigger the company be, the natural catastrophe loss is going to be expanding. So depending on the scale, the size can be different or become bigger.
Understood. Thank you.
Thank you, Mr. Sakamaki. Next, Daiwa Securities, Mr. Watanabe, please.
This question is related to the Middle East situation. The marine insurance with your domestic business, what kind of assumptions you have? If you have already, for the current fiscal year, are you expecting any negative impact? The second question is shareholder return. You have upward revised DPS expectation, and should we expect that the dividend increase speed is going to be faster in the future accordingly?
Thank you. Let me confirm your questions. First is about the Middle East. What kind of impact are we expecting? Second question is related to the shareholder returns. Thank you. Regarding your first question, Nakayama is going to answer.
Regarding domestic insurance, we do see the limited impact. Regarding overseas, especially in Europe, MS Amlin or MS Re, for these companies, they do cover the Middle East. However, as you understand or as you have pointed out, it is the accounting cover, the result in March and April, and regarding our one situation happened in February for certain exposures, so we have already included loss for FY 2025.
Talking about Middle Eastern situation, which is quite unstable, we would like to be prepared to take a look at the short term, the impact. For CPI or for other economic index, it is now in the inflation trend, and we have already incorporated that impact into our numbers. We have not incorporated the impact of economic decline. However, in the beginning of April, when Japan Bank has published a report, we have already included that impact. So in total, it is around JPY 30 billion appropriation, which we have already incorporated.
When you say JPY 30 billion, are you talking about FY 2026 or FY 2025?
Partially, the number is included for FY 2026. However, for overseas, the business which result in March or April, we did have numbers included for FY 2025. For domestic numbers, we included these numbers for FY 2026 according to our current plan.
Regarding your second question regarding shareholders return, I would like to address your question. The shareholder return, we have already presented the improvement or the increase of the dividend. This is basically in line with our traditional shareholder return policy. We have communicated that we are presenting the progressive dividend, and this is what we are considering for this fiscal and also for the next fiscal. We really do not have the fixed numbers. However, we would like to present the progressive dividend, and also we keep our basic shareholders return policy, which is the 50%, and I would like to have your understanding on this.
Thank you very much.
Thank you very much. Mr. Majima from Tokai Tokyo Intelligence Laboratory, please.
My first question, on page 32 for two non-life insurance company, there is the JPY 79 billion for merger expenses. I would like to know the breakdown, and I was wondering until when you are going to have merger expenses. That is my first question. Second question. When TaxiGo announced its listing, I understand that Aioi Nissay Dowa, they have the shares, and I was wondering if the sales of your share of TaxiGo is already included into the numbers. Is it included into the performance of this fiscal regarding the Barings?
So for your question regarding merger expense and also your second question was about the TaxiGo, the listing, and also our gain from the sales of the shares, and also you asked about the Barings company as well.
This is Nakayama speaking. I would like to answer your question regarding the merger expenses. Mr. Majima, you mentioned page 32, which is JPY 79 billion as the merger expenses. This is based on the IFRS 2026 before adjustment and also the after adjustment. However, I would like you to understand that this is the after-tax numbers. When you go back to page 28, as you can see, major assumptions for earning a forecast, JPY 111 billion.
This is the number that we have for FY 2026. There is the increase of the JPY 68.5 billion, meaning that before FY 2025 it was JPY 42.5 billion, and for FY 2026 it is JPY 111 billion. For merger expenses, the merger is scheduled at the April 1st, 2027, and we are projecting that there will be some numbers for FY 2027 as well, so that we are projecting that we do have numbers from FY 2025, 2026, and 2027 for the three years.
However, the merger numbers are coming from the fiscal year, so that was about the merger expenses. Did you also ask about breakdown? The biggest portion is coming from the system integration. Major part of the expenses is actually coming from the system integration, and also there is the integration of the locations, which we are having mainly in FY 2026. These are major expenses.
Thank you.
Your second question, which was about TaxiGo IPO related gain, is it included in these numbers? For the AD and also the MS, we would like to refrain from answering which shares we have sold.
How about Barings?
Regarding Barings , this is financial and related services, meaning, for FY 2026, I would like you to refer to the numbers by categories, and there is JPY 10 billion, which is for the financial services and also there is the social challenges related to businesses as well. The numbers are included here. However, for specific numbers, as Barings is not a listed company, I would like to refrain from answering specific numbers related to this.
Thank you very much.
Thank you. Next. Tsujino-san from BofA Securities.
I have two questions. You have made the announcement of the share buyback, which is around JPY 190 billion. Is it for the second half of the FY 2026 and also for this year's numbers? That is JPY 190 billion and also there is another announcement, possibly you are going to make in November. That is why you are saying that it will be JPY 270 billion in total for 2026. As for the physical numbers, the number from the second half will be incorporated for your financial results announcement, which you are going to have probably around the same time next year. That is my first question.
I think your question was about share buyback. Let me answer. Yes. What you explained right now sounds correct. First of all, JPY 190 billion. This was for second half 2025. JPY 80 billion is for 2026, first half or in the middle. In total, 2026, we are expecting JPY 270 billion. Sometime this time around next year, separately, depending on the adjusted profit expected, we may announce additional share buyback. That is it.
Thank you. JPY 80 billion we are expecting now is kind of additional share buyback, maybe 50% of the profit, excluding the capital level adjustments you are talking about.
No, this JPY 80 billion is reflecting the basic shareholder return.
For the whole year?
Half of the full year.
Understood. Second question is, the midterm plan you are also announcing, and in 2030, your adjusted profit target is JPY 100 billion. After in November, at the explanatory session The adjusted profit based on IFRS and J-GAAP, there were two different numbers, and one of them was around JPY 750 billion. Another one was JPY 760 billion or so. Now the number is becoming bigger. Is that because just you are rounding up the number, or is there any specific reasons why now is the profit you are expecting, adjusted profit you are expecting is not JPY 750 billion or JPY 760 billion, but JPY 800 billion? Is it foreign currency exchange? Thank you.
The business management plan we are announcing, the number is what you are asking for. As we explained at the beginning, the numbers we are announcing in November, we have been revisiting or scrutinizing. Now the probability of achieving numbers are becoming higher. Now we are adding up more probable numbers, and we are saying JPY 800 billion. It is not like rounding up JPY 750 billion or JPY 760 billion. We just scrutinize all of the business expected Group Adjusted Profit and accumulate it.
There's no specific business which is likely to perform much stronger than what you were expecting November?
International business, yes, is contributing a lot for the difference between now and the November.
Understood. Thank you.
Thank you. Next, Sasaki from Nomura Securities, please.
I am Sasaki from Nomura Securities. I have one question. Strategic equity holding, I think this year the outstanding balance is going to be much lower than last year. Is this expected number going to be-- Can this number become different at the end of the day? Because the trend can become even stronger to unwind the cross-shareholding or strategic equity holding. If that's the case, can this number actually become larger than what you're expecting for at this moment? Thank you.
It's about how much we are planning to downsize our strategic equity holding.
I am Nakayama. I will answer to your question. The thinking we have is, as we've been explaining, as you see on page 28, this year, we're expecting JPY 476.3 billion. Last year was JPY 701 billion. We're expecting more than JPY 200 billion decrease. We've been decreasing already a lot, and the yen has been weakening. Based on these assumptions, we have this plan. We believe this JPY 476.3 billion is a highly probable number. But of course, during the fiscal year, anything can happen, so the actual number can become higher or lower compared to this number.
Thank you.
Thank you. Any other questions? If not, we'd like to close the session. If there are any questions we could not take during the question, please feel free to access through our IR department. We will individually respond to your questions. This concludes today's conference call. We appreciate your continuous support and understanding. Thank you very much for joining our earnings conference call today. Thank you.