Sompo Holdings, Inc. (8630) Earnings Call Transcript & Summary

Thank you. I am Oba, CEO of Domestic Life Insurance Business. Thank you very much for taking a busy time out of your schedule to join us today. We have only limited time, but we'd like to talk about our efforts so that you can understand it. And we hope that this meeting will be helpful to you. Thank you. So I'd like to spend about 15 minutes to talk about Domestic Life Insurance Business. Please refer to Page 4 of the presentation material. So let's look back at the previous midterm management plan. As we mentioned, as for the adjusted profit, in 2015, as a beginning, the 2.1% C-A-G-R, CAGR was achieved and positive 5.0% in terms of the MCEV. At the bottom, you see the overall Sompo Group trend of the profit as a whole. There were some variabilities, but the domestic life business have had a very stable adjusted profit, and steady growth was achieved. And we played a role of doing so. Next, moving on to Page 5. During the former midterm management plan, there were 2 major pillars. One was the new growth strategy to become a growth driver, and we have been trying to do this. This is what we call Insurhealth initiative. Usually, this is used in the insurance products to enhance our health, but in our case, we would like to combine the insurance and health care. So this is the type of product, the Insurhealth, that we have been promoting. And that has been one of the major pillars of our efforts. The second pillar was the discontinuous or disruptive productivity improvement, including the low-cost operation. And as a result of those, as you can see on the right-hand side, the written premium base average growth was 2.4% per year. And for those major life insurance companies, we are one of the leading companies among the major life insurers above JPY 300 billion level. And when we have more policies in force, we have an increasing cost usually, but we have tried to control the cost and general expenses, 0.3% increase only. So it was almost flat. So we have controlled this number. And as a result, the adjusted profit, which is our management index, and we achieved a CAGR of 2.1%. If I may talk about the further breakdown using the Page 6, now from the growth perspective compared to peers, the annualized premiums of the policies in force are shown, and in comparison to 2015, as one, the Himawari Life growth trend is shown, and also all companies in our industry is also shown as a comparison. Especially in fiscal 2020, ours is 1.15 and all companies is 1.07. And the new policies, in the case of Himawari, it's 7.3% positive year-on-year. So as an industry as a whole, the new policy is about a 20% decline. And based on that, the new premiums, we have achieved a much higher growth. And one of the pillars of our growth strategy that is Insurhealth as I mentioned, and in fiscal 2018, we started to promote this. And so in the past 3 years, we have been providing the products and services. So the percentage of the Insurhealth, as you can see on the left-hand side at the bottom, 59%, almost 60% is the Insurhealth product. So what does this mean? Now if you look at the productivity by product, the protection-type product, and we are promoting the Insurhealth products and services. If you look at the Insurhealth diagram, so it's 1.5x that of the other non-Insurhealth products. So we are increasing the profitability, and we are, at the same time, expanding this business. So if we continue to do this, the profit is for sure to increase, so this is something that we'd like to continue. And at the same time, in comparison to other companies, in terms of profitability, the new business margin, policy margin as you see, is the 13.5%. So those companies who disclose EV, we are -- among them, we are one of the top class. Now moving on to Page 7. So this looks at the new midterm management plan. There are 3 pillars. First is the new customer acquisition. So Insurhealth, we will continue to use Insurhealth as a growth driver. So this would take root in the market. And second, as we tried to do in the previous midterm management plan, we will focus on the low-cost operations and capital efficiency and also to reduce the interest rate risk to enhance the capital efficiency. So with those 3 pillars, we would like to promote our midterm management plan, a new medium-term management plan. Going on to Page 8, this shows the adjusted profit. And based on the adjusted profit, over JPY 40 billion is our target and JPY 33.8 billion adjusted profit was achieved, and we have a breakdown of the different factors, which are shown on the left-hand side of the Page 8. So as you can see, the top line, with the expansion of the top line, we are increasing the profit, and at the same time, we are making the growth investment. And also, we are harvesting the results of the low-cost operation. And by doing so, we would like to achieve JPY 40 billion target. Page 9 shows each strategy over the 3 pillars in more detail. So I'm going to just highlight the key points. Starting with new customer creation, as I mentioned earlier, with the Insurhealth as a driver, we'd like to expand the market, while promoting the Insurhealth, which is a high profitability product. As I mentioned earlier, 60% of the new business is comprised of new Insurhealth products, but in the final year of the medium-term management plan, which is the end of FY 2023, we'd like to raise the Insurhealth ratio to 80%. That is our target. In terms of the new business size, please look at the right-hand side. For the actual of 2020, the annualized new premiums, JPY 26.8 billion. This is the internal standard sales performance basis, which is roughly JPY 30 billion. So we'd like to increase that to JPY 50 billion. This is a new premium basis. In other words, we'd like to raise JPY 30 billion to JPY 50 billion, which is the increase of JPY 20 billion over 3 years down the road. Page 10, please. This page shows the growth investment, the size of the investment for 3 years and the breakdown of the investments that we are going to make. For 3 years, for growth, we'd like to invest around JPY 15.5 billion, and the breakdown of that is shown on this page. The development of products, service, brand promotion, direct sales promotion and others in those areas, we'd like to make bold investments in those areas for the future 3 years. As a matter, of course, we'd like to confirm the return from those investments through monitoring, and with the discipline, we'd like to implement investments for future growth in those areas. Page 10, on the right-hand side, we are showing the effect of investment. According to the current plan, through those investments, the annualized new premiums will be increased. So EV from that and adjusted profit from the increased annualized new payments is illustrated here. On the EV basis, the payback period is roughly 3 years. On the adjusted profit basis, payback period will be about 5 years for those investments, that we are going to make with discipline. So we'd like to keep monitoring the progress that we make. Page 11, please. About the new customer creation, this is going to be the one of the pillars, which is the Health Support CX. In the previous medium-term management plan, we worked on the number of policies imports, improvement and health care service. So we have health care service customers and existing customers, and we have Insurhealth customers who are the customer base in both. In all of those areas, steadily, the customer base has been increasing. So I would like to expand the customer base further more. That is a meaning of the Health Support CX. If you look at the right-hand side on Page 11, what it means is that we utilize the accumulated health care data or health data of the health care services that we provide. We are going to deepen in the communication with customers, and we are going to propose various health care services, insurance services and health care services with Insurhealth services to the existing customer base. For example, the health care service is explained as an example. In 2018, we have the system called Health Challenge, where after their enrollment, if they work on the quitting smoking, diet, improvement of the blood pressure, for those 3 KPIs, once they achieve certain criteria, then they are qualified as the success of the enhancement of the health and we give them discounts of the premiums. And also retroactively, we give cash back to them to celebrate the success. So successful applicants, meaning people who became healthier by achieving 3 KPIs, we have more than 3,000 people who succeeded in this, which is about 80% of people who have challenged to improve the health. So they are becoming healthy and healthier by being enrolled in this. We have the data and the result of the communication with those people, so that will enable us to provide health care services and insurance services. That's a meaning of Health Support CX. So through Health Support CX, we'd like to increase the number of customers. Please go to Page 11. This is the second pillar of the new medium-term management plan, which is a low-cost operation. Excuse me, Page 12. On Page 12, we are showing the business expense structure, the increases and decreases factor in 2020, JPY 59.6 billion. In 3 years from now, business expense is expected to be JPY 60.7 billion, almost no change from the current level. That is our plan. And this page, Page 12, shows the breakdown of that. I'm going to omit a detailed explanation. However, as I mentioned earlier, we have investments for growth, which is plus JPY 4.8 billion. Over 3 years, we are going to invest JPY 4.8 billion. So in total, JPY 14.5 billion over 3 years. And the benefit of that will be seen in 2021 onwards through the low-cost operation with a lower cost base, low cost operation, JPY 2.3 billion in 2021, and then JPY 1.7 billion in 2023. So those are the benefits from the investments. And ultimately, you would like to achieve JPY 60.7 billion business expense in 2023. Please go to Page 13, capital efficiency improvement, which is the third business pillar. The biggest risk in the Life business is the interest risk, interest rate risk. So we are going to work on reducing the interest rate risk. We'd like to invest JPY 300 billion over 3 years in investing in super long-term bonds to reduce the interest rate risks. By taking this bold action on the asset side, on the liability side, I would like to promote Insurhealth developing products and services by considering risk and return profile and optimize our portfolio to improve the capital efficiency overall. In addition, this initiative will contribute positively to the capital efficiency improvement of the whole group. Page 14 onwards show just for information as a reference, so I'm going to omit the explanation. But we are showing the channel mix and productivity improvement results from the previous medium-term management plan and the general account investment asset and so forth. So please refer to them later. So this completes my explanation on the insurance business. And I'm looking forward to answering your questions in the Q&A session later on. Thank you so much.

Thank you, Mr. Oba. Next, we have Mr. Kasai about the Nursing Care and Seniors business.

Thank you. This is Kasai of Nursing Care and Seniors business. Thank you very much indeed for this opportunity. We're very happy that many people are attending. We hope that this will deepen your understanding about our Nursing Care and Seniors business. So I would also like to present starting with Page 20. So Page 20 talks about the concept. We have purpose in Sompo Group, which is shown in this midterm management plan and Nursing Care and Seniors business. We'd like to create a healthy and happy future society. And so this is something that we would like to promote in our business. In order to realize that, as you can see on the left-hand side, we would like to grow as a nursing care operator. And as a group, we are working strategically on the RDP area. So we'd like to create the new barriers from that. So today, on the next page to talk about, I'm sure that there are many people in charge of the finance and the insurance, so I would like to talk about those perspectives first. So on Page 21, in Nikkei this morning, we talked about the care provider, nursing care providers. So the social insurance expenses. So JPY 12.3 trillion right now, that is the benefit cost, and it's likely to increase to JPY 58.8 billion (sic) [ 25.8 trillion ] in the near future. So this is a growing market and demand is going to increase. And this is a growth market in our understanding. However, as you see on the right-hand side, the demand is increasing and those people requiring the nursing care and systems. But in comparison to that, the supply capability is not likely to increase so much. So there is a big challenge there due to this gap. Now according to the Ministry of Health and also METI, their forecast is that in 2040, 600,000 a shortage of the care provider, nursing care provider will emerge. And as the working population decreases, how to secure the providers of the nursing care. And how do you support 200,000 or more people requiring the nursing care and support is a big challenge. Moving on to the next page, now looking at our industry of the nursing care services, and this shows the positioning of our company. So here, we compare the 5 major companies. And as you can see in the footnote, the company A has delisted. So we are unable to get the disclosed information. So company A only talks about the fiscal '19 results. But there are no major changes in terms of the sales. Now Sompo Care, which is our company, we are #2, and JPY 6.8 billion is the sales number and operating profit number is compared and JPY 9.5 billion, 7.2% margin. And despite the pandemic, JPY 3.4 billion increase of the sales year-on-year was achieved. If you look at the other companies, the sales are growing. And fiscal '20 was under the pandemic. But this is one of the essential services necessary in the society. So the demand did not decline, but rather increased. Now Sompo Care operating profit is JPY 9.5 billion, and the company B is JPY 10.5 billion. So you might say that our profitability is a little bit low. But those numbers, there are some reasons. Last fiscal year, Tokyo Tatemono nursing care business was what we acquired. So goodwill depreciate amortization was done at 1 time. So that actually changed this number. So if it was not done at one time, it should have been JPY 11 billion or higher sales. So including the profitability, we are one of the leading companies in this industry. Now that is the industry. And if you look at the slide, the benefit cost of the nursing care is JPY 12 trillion and the top 5 companies, JPY 150 billion and about higher than JPY 400 billion, so close to JPY 500 billion is the sales. So this market is quite fragmented. So even with the 5 major companies, the market share of those companies is quite low. So in this industry, one of the challenges that I mentioned is that we are faced with aging, with the fewer children, and how do you need -- do we improve the productivity and how do we realize that, and at the same time, achieve the high quality. So that is something that we are trying to achieve. Moving on to the next page. So here is the -- looking back at the previous midterm management plan we entered into this business and we have been doing this business fully in fiscal 2016 and it was JPY 7.3 billion as you see in fiscal 2020. So we have made a steady growth in terms of adjusted profit. So [ Message ] and [ Tatami's Kaigo ] those were the companies that we acquired. And so one time, they were in red, but we tried to foster their potential to grow those businesses steadily. On the right-hand side, we are showing the measures of the Sompo Care, those are qualitative items. And we have been making the steady preparation in the past for the further growth. For example, the improvement of the education, as it was mentioned in today's article, we are trying to make sure that 11.1% was the turnover in fiscal '21, which is on par with the other peers. So we have lowered the turnover of the personnel down to 11 point -- 11% level. So next page. More specifically, we are looking at the MTMP, starting with the fiscal '21. There are 3 major strategies that we have. One is to support the aging society as a nursing care operator, as a provider of the nursing care services, and we would also like to support with the ecosystem. That is to say that other players, also the medical area, pharmacies and the suppliers would like to work together with them as an ecosystem to make a contribution. And the third is to support active seniors. And this is a bit different from the nursing care industry. But -- so before requiring nursing care, younger senior, we would like to lengthen the healthy life span so that they will not require the nursing care in the future. So we also would like to make a contribution in that area. Next page, Page 25. In order to realize that or by realizing that, what kind of outcome can we expect? Right now it's JPY 7.3 billion adjusted profit, and we would like to exceed JPY 8 billion in fiscal '23. You might say that this is probably too low, but what we would like to do is the improvement of the compensation, that is minus JPY 1.5 billion. The nursing care providers, it was very difficult to recruit them. That would be something that we expect in the Japanese society. So we'd like to make sure that we provide the sufficient compensation to them. And in coming 3 years, we would like to work on this so that we can be the leader in this area of our industry. In terms of the top line, we would like to increase this by JPY 30 billion, achieving the JPY 20 trillion. Organically, we have facilities and the profit, say that JPY 100 trillion from them and through the M&As or new facilities. Creating a new facility JPY 15 billion and the solution business, which I will talk about later, supporting as an ecosystem, JPY 5 billion growth. So total of JPY 30 billion is what we expect. So getting into more details for each strategy, I would like to provide support as a nursing operator. there are 2 elements on the left-hand side, as we have been saying, I would like to increase the capacity by improving the productivity. We cannot just simply do what we have been doing. If we do so, then we will face a shortage of labor. So we'd like to improve the productivity by leveraging ICT and digitalization. And for the real data platform, which I'm going to explain in more details using data platform, I would like to improve the quality of the service. And the benefits from the productivity improvement will be paid back to improve the compensation for our employees so that we can attract people, labor force, in the industry. In addition, if you look at the right-hand side, I would like to do in-house development of facilities and would like to take on M&A activity to achieve growth for the future. Next page, please. I would like to support by the ecosystem. So there are mainly 2 initiatives. On the left-hand side, real data platform vision I'd like to create ecosystem using data. Later on, we are going to explain in more details, RDP. But through the nursing care service, on a daily basis, we have access to various pieces of data on residents. Currently, we have more than 20,000 residents for facilities that we operate. We have the deep data, dietary data and the daily activity data and the nursing care data. On a daily basis, we have access to those pieces of data, including vital data. We can structure the data, analyze the data and create new values. And we'd like to provide this as a whole value in the whole industry. On the right-hand side, we are showing the business process support service. I mentioned that we'd like to grow by JPY 5 billion in this area. As a major care provider, we have the quality and the productivity. And the purchasing power, as a major company, So I would like to provide all of those to other operators in the industry, which we started in the last year. We have already started to generate JPY 1.2 billion in revenue, doing business with more than 200 operators. So we'd like to promote that more because this is a big strategy to improve the productivity in the whole industry. Next page, please, supporting active seniors, Page 28. There are mainly 2 aspects. Number one, smart community business, which we started last fiscal year. The society becomes smarter and smarter using more digital technologies. Lives of people are changing. So senior people are feeling that they are left behind. Amid the COVID environment, we saw the digital divide, which changed the quality of lives for many people. So I would like to challenge to resolve the digital divide. And I would like to think about how we can better support senior people to enrich the lives of senior people in this smart community business. That's on the left-hand side. On the right-hand side, we are showing our initiative on the cognitive decline prevention service. In 2018, we have started this support program. So preventive program has been released, which is called Sompo Smile Aging program. So through this program, the mild cognitive impairment people, we are going to work on them so that their cognitive impairment will not deteriorate. Next page, please. Lastly, let me talk about nursing care RDP. The overall vision is summarized on this page. At the core, we have Sompo Group nursing care RDP at this core. As I mentioned earlier, using data, we'd like to improve the quality and the productivity. We'd like to provide the know-hows of operations to other operators in the industry. to leverage the data that we have. And other than that, if you look at the right-hand side, I would like to work with medical institutions, suppliers, pharmacies and government and municipalities. Through data, we'd like to collaborate with those counterparties, so that the quality and the productivity of Japanese nursing care will be improved and enhanced. So that's how we'd like to make a contribution in this area. Last page, please. This has something in more concrete, specific example of what we can do. This is only 1 example, and we are still in the stage of the research or study trying to pursue the possibility from this initiative. From the residents, we have various data, and we are using the data to give a score like cognitive function, activity function and the nutritional status of users and the daily vital data. And for each person, we are doing the scoring. For example, 100 is the best, 70 score against 100. So after a while, the state changes from state A to state B. So if our state is showing the improvement, that's good. But for some reasons, the state is deteriorating. So we are benchmarking various scores by analyzing intervention factors. Using the data, through this analysis, if possible, we'd like to know the body status, so that they can maintain the body status. We'd like to have positive intervention factors, and we analyze those and utilize the results in our nursing care services, which will generate large values. So in this way, we would like to analyze a very complicated data that will lead to better solutions. That is going to be very helpful for the products for the residents. Through this, we'd like to create the new nursing care, we'd like to contribute to the new way of doing the nursing care business. So including the details, my presentation became a little bit lengthy, but thank you so much for listening.

Mr. Kasai, thank you very much. So that concludes the presentations from our side. I'd like to take questions now.

First, from SMBC Nikko Securities, we have Mr. Muraki.

This is Muraki of SMBC Nikko Securities. About the life insurance, I have 2 questions to Mr. Oba. First, on Page 6, the right-hand side bottom, you have the profitability by products, the Insurhealth combination of the insurance and health care. You mentioned that other companies also have insurance products to enhance the health. In the interview, the improvement speed and evolution could be the differentiating factor. So right now, what is the current status of the price competition in order to maintain the profitability, what would be needed Could you talk about your thoughts on those points? My second question is on Page 7. The right-hand side, 5.7%, the ROE by segment is shown. So that means that the JPY 700 billion in -- is the capital. So JPY 700 billion capital. In the final year of the management, the reducing the back book interest rate interest rate, is it based on that? And also in relation to this, what is the tolerable ROE in Japan domestic insurance? So the overall target is 10%. So with the 5.7%, there is still a gap. So do you think that you can increase this closer -- getting closer to the 10% in the future?

Thank you, Mr. Muraki for your questions. First question. Other companies are also offering the insurance focusing on the enhancement of the health. So how do we differentiate from them and including the price in order to maintain our competitiveness, what would be the key points. That was your question. I think it's a very good question. Other companies of course, are providing the insurance fees focusing on the enhancement of the health and competition in comparison to the past is intensifying. That is a fact. Now if you look at the products and services, differentiators that we have, there are minor differences that we can list up. But from the customers' perspective, they are not so different in terms of the products and services. I think that is the understanding of the customer. So it's not just differentiating products and services. There is -- because there is a limitation as to differentiate only based on the products and services. So how do you differentiate from others? As I touched upon in my presentation, I talked about the health support CX. So the contact point with the customers, those customers applied for this insurance, what kind of contact do we have? And how do we change their behavior? And what kind of outcome can they experience? That I think is the key, and I think we have entered into that stage. And if we do this well or if we only combine the health care and insurance, I think there will be a difference of the outcome. So whether we have a true health support CX or we are just combining the health care and the insurance, that would probably differentiate the customers' evaluation. So when we say health support CX, it's not something very simple or easy. In order to do this, in terms of the procedure of the insurance, there is a contact or engagement with the customers. And also in the health care area. We need to change everything or redesign everything from the beginning. So that means for the new policies, the percentage of the Insurhealth 60%. And as I mentioned, we want to increase that up to 80%. And so other companies offering just something similar, the change in the operation due to the efficiency probably is difficult. So in our case, most of the new policies is something that we want to switch over to the Insurhealth. So insurance and noninsurance operation, we are redefining or redesigning so that we can complete the health support CX. And that's how we intend to differentiate ourselves. That is a phase that we are in. One of the results I can talk about is the health challenge that I talked about, 80% of those people who challenged have improved 3 factors, and they became healthier. So this evaluation, the quality insurance, this would lead to the expansion of the market. And if we are able to do so, I think we can differentiate ourselves from other companies. And this would make it possible to avoid the price competition. So that is what we are thinking, and we'd like to promote this. Your second question about the ROE. ROE target, as you can see, 5.7%. Frankly speaking, the group target is 10%, so it's much lower than that. And I agree that it is too low. But one of the way the numerator here is the realized adjusted profit, but the denominator is economic value risk volume. And this is based on the capital allocated from the group. And if you use the denominator, we can come up with a number 5.7%. So there are different ways of looking at our ROE. If we use such denominator, we are still trying to increase the new policies and also trying to increase the policies in force. So unrealized profit is -- including the unrealized profit, policies in force is high. So if we use that denominator, the segment ROE tend to be lower. So we are doing different calculations, and there are certain level of the limitation. So for example, if you combine the numerator, denominator, and if you replace it with adjusted profit and if you calculate the ROE in 2023, that will be 7.6% level. That is one of the numbers that we can come up with. But still, it's lower than 10, but that's a life insurance business. We need to look at this number and try to make a contribution so that we can achieve as close to 10% ROE.

Hamada speaking. Muraki-san talked about the segment ROE. Please refer to Page 34. This is for your reference, and this shows the overall group plan, and adjusted profit and also the segment ROE is shown. We started doing this with this new midterm management plan. So overall ROE is one of the most important index, and we also thought that we have to break it down to segment. But segment ROE, especially the denominator, could be distorted because of course, we want to utilize the capital effectively, but domestic life insurance, for example, non-Japan the stock might be included and in each business, there are some differences. And as Mr. Oba said, the domestic P&C and the life insurance based on the risk model, those are the virtual numbers. And as Oba-san explained, for example, as for the life insurance denominator and the numerator, the period could be different. And we want to smooth it out. So IFRS based numerator can be utilized and then it will be close to 10% in fiscal '23. And so fiscal '23, just looking at this, other companies are achieving higher than 10% and domestic life insurance is lower and the lower efficiency. Therefore, it's not as simple as that. But more importantly, I think that those letters are very small. The second line from the bottom, there is an explanation. What is important for us is that each year, each business the profit and capital not going to work as we expected. But as a whole, the higher than 10% can be maintained as a group. So every year, we look at each business and we look at the group ROE. We need to watch that very closely. And then we would like to break it down and think about what we'd do next year. So we'd like to make sure that we actually can achieve the ROE of 10%. And so this is kind of a virtual breakdown. And so domestic life insurance, of course, this is a number, but you have to really look at the trend, whether we are following the plan or whether we are seeing the growth. That is more important.

Thank you so much. Mr. Muraki, thank you so much. Next questions are from Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Ms. Tsujino.

Return on equity, I fully understood your discussion, but what about return on EV? Still, your ROEV is not so high in this stage, and new business EV, either you have to improve new business EV significantly or interest rate risk reduction, and the capital you allocate to Life business gets reduced. So either 1 of the 2 initiatives has to be taken to improve ROEV. But here in your explanation, if new business EV cannot grow, and if we can reduce the interest rate risks, then it makes sense. Am I right? That's my first question. My second question is on the reduction of the interest rate risks The graph is quite vague. Would you please give us more color in what specific year, such as by the end of 2023, how much magnitude of interest rate risks you are planning to reduce? I have to use the scale to measure the magnitude of the interest rate risk reduction for the whole group, by using the hedge ratio that you apply in the company. Or you can just show the risk amount, trajectory of being reduced. Would you please give me more color on the pace of the interest rate reduction?

Thank you so much for your question. To your first question MCEV increase, what are the initiatives we are going to take, as you mentioned correctly, we'd like to increase new business EV while reducing the interest rate risks. And for the new business EV, how to improve is to promote highly profitable policies or products with added values in the market, meaning Insurhealth promotion is a way to improve the new business EV and to reduce the interest rate risks. We have a plan to invest JPY 300 billion in the super long-term bonds. The traditional scale was around JPY 200 billion. So we are adding 1,000 -- JPY 100 billion more investing in super loan bonds to reduce the interest rate risks. In addition, by improving the new business EV, on the liability side, we get the benefit. So this has a positive impact on enhancing the EV. And as a matter, of course, we are going to see the benefit and improvement then, we can reduce the capital allocated to Life business. Therefore, it contributes positively to the enhancement of the capital efficiency for the whole group. As you mentioned correctly, yes, you're right. To your second question, Page 13, we are sorry the graph is quite vague. But to give you more color, this is a total group interest rate risk, which is currently JPY 530 billion, of which interest rate risk for Himawari Life is about 90%. So the majority of the interest rate risk of the group is related to Himawari Life. Himawari Life bears the majority of the interest rate risk for the whole group, thus FY 2020. So we are going to invest JPY 300 billion in super long-term bonds and how much interest rates can we reduce. As of the end of March, we look at the interest rate level and the projection for the interest rates, and how much risk can we reduced by investing JPY 300 billion in super long bonds. It depends on the interest rate level. So we don't want to mislead the market. That's why we are showing this vague graph. But looking at the interest rate risk as of the end of March, when we do the trial calculation, then we can reduce the interest rate risk by about 20%. Roughly speaking, we'd like to reduce by about 20%. So I would like to invest in super long-dated bonds by reducing the interest rate -- to reduce the interest rate risk by around that much.

Well, for your size of the company, in fact, you can reduce the interest rate risks at much faster pace maybe this sounds irresponsible by simply saying that to you. But for the whole group, if there is an opportunity, you mentioned that you were interested in doing a large M&A. So if possible, I think you can reduce the interest rate risk at a much faster pace, if you can. Am I right in understanding that you have that intention to reduce interest risk much faster?

Let me answer that question. Hamada speaking. In this current medium-term management plan, for P&C business, we are going to slow down the pace of strategically held equity stocks sale. And we talked about investments for growth, including M&As. But I would like to create a capital buffer of JPY 100 billion by reducing the interest rate risks. So starting from last year FY 2020, when interest rates started to rise, we started to invest more in the super long bonds. As a result, coincidently in the new midterm management plan, based on the end of FY 2020, then this is a reduction of magnitude, which is a little bit vague, but we have the budget of JPY 600 billion for gross investments. And as an assumption of how much interest risk should we reduce, and this is the trade-off with the return in other businesses. So if we encounter an attractive large M&A deal, then we can adjust the speed, we can accelerate the speed. That's all.

Next, from Mizuho Securities, we have Mr. Sato.

This is Sato of Mizuho Securities. First question is a simple question. The point of clarification on number. Page 8 on the right-hand side, MCEV change, especially the new policy, JPY 160 billion in 3 years. I think it was like JPY 30 billion per year. So it seems that it's accelerating. So what are the volume factors and margin factors? Could you give us the explanation on that? And if one is larger than the other, could you talk about the probability of achieving those targets? Second question, nursing care and the life insurance synergy between the 2, I'd like to ask about that. Well, since the past, the insurance group doing the nursing care, the significance of it, I think you have been talking about that. In terms of the ideas already, the dementia-related insurance and nursing care insurance, those are easy to think about. But so far, what you have done and also what you will do in the future, the generating synergy among different businesses, are there any possibilities that you can talk about?

Yes, Mr. Sato, I'd like to respond to the first question, Page 8. EV increase and the factors, new policy value, JPY 160 billion, your question was about this one. Is it volume or margin related, that was my understanding. The answer is that it's due to the volume, the new policy volume in the new management plan period, 3 years. That would be effective and we can achieve this growth as a result. On Page 10, we are showing you the 3-year the new business volume during this new midterm plan, especially 2020 to 2023. The new policy declined due to the pandemic in 2020 and '21. The new business is likely to increase. So that factor is large. So that is something to help you understand this. As for your second question, Kasai-san and maybe I have some additional comments.

Yes, Kasai. I'd like to respond to your second question. You said rightly that in the dementia, we have a nursing care product and services. We have connected those. More recently, [indiscernible], the pharmaceutical company drug for the dementia, this is for the initial stage of the dementia, this is a drug that is being launched and it's very expensive, the treatment is expensive, so that's one of the challenges that we are seeing. So aging and with the power of finance, we can overcome some of those challenges. So insurance and the nursing care has a lot of the links. And now we are and more people are living over 100 years old. So senior people or elder people have many anxieties whether they can live on their assets. Do they have sufficient assets? So that is one of the worries that the elderly people have. So as a group, how can we help elders? So that's one of the things that we are thinking about. So including the insurance products, we would like to respond to those needs.

This is Hamada, I would like to say a few words on synergy. Right now, real data platform is what we are trying to do. And there are 5 areas that we talked about previously. And the nursing care RDP is one of the leading examples. And at the bottom of the pie, healthy aging was another item. And business owner, the nursing care and the digital and health care and life insurance, all of them need to work on this. So for this one, we have not yet completed the big picture. So each business has a different way of thinking and health care, we have so many players and to monetize is difficult. So to provide a safe and secure is something that other companies are saying and also this is a used phrase for the Olympic games. So this is one of the areas that we would like to provide the solution. So the new major synergy is something that we'd like to show in the area of the RDP, but we are unable to say more on this.

If that is the case, RDP, the product productivity probably can -- sorry, the profitability can be to also mention in the next medium-term management plan. But having the big picture and getting the consensus and you can move on to the trial. So this is more longer term target?

Well, you can rush us. It's not necessarily the long term. So we are hoping that we will see something in the shorter term.

Oba speaking, more recently, what we are trying to do, we shouldn't really talk about very long term. So some examples in the Insurhealth product, we have a dementia insurance. And this product, it's not just payment of the insurance payment once the people become dementia. But in the case of dementia, the first stage is very important, that is MCI. The initial stage of the dementia or mild cognitive impairment or MCI is very important. So as our Insurhealth for those people at the -- in the MCI, we can also pay insurance. So what this means is that even before suffering from dementia, we can pay insurance so that the customer or patient can get, for example, the introduction to the facility or introduction to the services which are suitable for them. So that becomes possible. So we can take advantage of the MCI, for example. So that is the product that we already offer. So at the time of the payment of the insurance of the MCI, so we can recommend and introduce our facility. We can solve some of the issues. So before the RDP stage, the different businesses can be organically aligned to offer different products and services. That's one of the examples.

So 3 of you relating to your questions, Mr. Watanabe from Daiwa Securities has this question: For the Nursing Care business, you have spun off the health care business. For the life business, nursing care business and the relation between the 2, what changes are you anticipating, including the potential usage of the data that each business has? That's the question came from Daiwa Securities.

So I think the question was about the classification of the business owners. But traditionally, we said nursing health care business. We manage nursing care business and everything else. And for the digital and for the health care in the new medium-term management plan, we do not categorize them as others, but we have spun off health care and the digital by giving them responsibility and accountability. That's why we made health care and digital as independent segment. For the health care, already, we have 2 vehicles relating to the health care, but our profit scale is still small. And to acquire the customer context, we could buy a large health care company or we can approach it from the digital perspective which is a trend. But we'd like to grow the health care business so that we can show the path to a strong profitability. So that's why we have secured this health care business as a stand-alone independent business.

Next, Shigemura san from Nomura Securities.

My name is Shigemura, responsible for the Healthcare business and Sakamaki from my company is responsible for the insurance business. I have 2 questions relating to the nursing care business. Number one, your policy to promote the former Message and Watami and Tokyo Tatemono, we have been acquiring those companies and regions vary and the price points vary. So to enlarge the size, are you acquiring those companies? And do you intend to acquire more? Or acquisition phase is finished and going forward, are you going to head into the stage where you would like to be more dominant? What is your growth strategy going forward? That's my number one question. My second question is, on Page 27 onwards, the ecosystem in the nursing care industry. So you mentioned that you'd combine the nursing care with health care when you develop the real data platform. What are your priorities? What do you need to add in the future? So do you need to add data scientists or AI development logic venture company or companies or the companies who have the nursing care data pack? You talked about dementia, but Frontier is developing the diagnostic AI in the dementia area, what are the priority areas for you to expand the nursing care business in the future?

Shigemura san, thank you so much for your questions. So Kasai speaking, let me address your questions. First, what is our direction of the nursing care business in the future? As you mentioned, we acquired Message and Watami and Tokyo Tatemono Senior Life Support. Gradually, there -- we have acquired those companies and slightly, the business areas are different. But in particular, Message and Watami no Kaigo, we acquired them and combined them into one from the middle to middle upper. That's the presence of those former companies in the segment. So Tokyo Tatemono Senior Life Support belongs to the same segment. In principle, the areas where we can really demonstrate our strength, which are middle to upper middle. Those are the segments where we'd like to continue to grow our nursing care business in the future. As you mentioned correctly, regions are different, and I would like to identify the marketability. We would like to grow in markets where the growth is sure for 20 years down the road. Another policy. We have not only the facilities, but we are providing at-home care services, too. There is distortion in terms of the market coverage, regional coverage for at-home care. So in as many markets as possible, we'd like to have a full lineups from the facility-based to the home-based. In particular, in Kansai region, our main business is facility-based. So in those regions, including Kansai, we'd like to consider M&As of home-based care or organically expand facility-based care, so we'd like to do our best so that our company is highly evaluated as a company, which is deeply rooted in each region. To your second question relating to the ecosystem. As you pointed out, yes, this area is diverse, needing all sorts of capabilities. We are fully aware of that. So data analysis, AI technologies, in those areas, we have partnership, strong partnership with Palantir, which is a company of the data analytics worldwide well-known company. And in the AI area, we have the partnership with Avega, which is a Japanese top player in the specific area. So we have partners in each respective area. So in those areas, we'd like to jointly create values with the partners. In addition, as we mentioned, medical, dispensing, medicine, academia, we need know-how and knowledge from those stakeholders. So we'd like to partner with other companies. And one example is [indiscernible], comprehensive partnership, AIST. And with them, I think there are many things that we can work with them in the nursing care business. We alone cannot provide all services, academic aspects like medical or there are various technologies relating to nursing care to evaluate the quality or the safety. This AIST has a very strong know hows. So we'd like to have support from those companies, including a mild support partnership, all the way to strong partnerships. So we'd like to create ecosystem so that we can enhance the quality of values that we provide in this area.

Next from Citigroup Group Global Markets, we have Mr. Niwa.

This is Niwa speaking. I have one question each for life insurance and nursing care. Starting with the life insurance. I would like to know the market share in the medium to long term in this industry. On Page 15, by channel, could you talk about that? Promoting the Insurhealth is the key, you mentioned. So if that is the case, probably the proprietary life insurance channel is easier to access for you. So is it P&C, shared with P&C or do you think that those channels and the percentage would change? And in promoting this, right now, the positioning, I think, is stronger with the P&C. But at certain point, should we expect that you would change that? Or do you think that would not change in terms of the share? Could you talk about your intention? The second question is on Page 29. On the right-hand side, at the bottom, the related players create active hub and function as a infrastructure supporting the industry. I'd like to ask a question on this. So there are 2 things. As an achievement until now, the -- are there any examples of working with the government and municipalities? As Sompo Holdings, with this group, does it help the alignment with the government and municipalities? So any examples that you can talk about? Second point is that in the future, as your group, the data is going to be your strength. So the hub for the related players, is this the key component? That is to say that in the nursing care, this is more -- very labor-intensive and seems that the data is not so important. So how -- do you think that the data is extremely important or not? So if you can discuss this point. So how do you grasp or how do you understand the data as your industry perspective?

Thank you, Mr. Niwa. To your first question, in terms of channels, I'd like to answer to your question on Page 15. So here, this is the new premium -- annualized new premium composition ratio by sales channels. And in our case, we have a strong P&C, and we started as that, so 64% channel shared with the P&C. So the proprietary life insurance channel is 36%. So this is the current level. And through the previous midterm management plan, if I may talk about that in summary, the channel is shared with the P&C, right now it is 64%, but it's declining, minus 0.3 percentage point down to reach 64%. And as for the proprietary, it's currently 36%. This is up by 2.6 percentage point. So this is growing as a channel. And channels shared with P&C, most of them are the P&C professional. So because of the policies of the P&C, there have been the rationalization of the agents and dealers. So about 30% decline is the trend that we have seen. And with that, the percentage or the importance of the channel shared with the P&C is declining. Now as we promote Insurhealth, is it better to go with the channel shared with P&C or proprietary life insurance? That is not the case. How do you provide value to the customers and generate outcome is the most important thing. So in that sense, there have been a lot of integration of the channels shared with the P&C, but the quality is improving. So we are -- as the quality improves, Insurhealth -- if this channel can handle our Insurhealth, the channel shared with the P&C is -- continues to be important. But as for the proprietary life insurance channel, there are higher -- more and more points -- contact points, and there is a capability of -- the sales capability is high. It is a group of professionals selling life insurance, and it's very competitive area. So providing the Insurhealth, if we can provide a good outcome, it will be easier to choose this product. So which channel is more important, that is not what we are focusing on. Now as for the future, we started as a P&C company, and we also provide life insurance, and whether we would become the major competitor against the others, exactly, that's something that we would like to do. But the life insurance business is the business where it comes from the policy in force. So there are 100-year-old players, many major players. So Himawari Life celebrates 40th anniversary this year. So it's only 40 years old. It's very short in comparison to other companies. So some people say that we cannot really win or beat the others, but that is not the case. Highly profitable protection-type product is something that we have been increasing. So profitability level -- based on the profitability level, especially based on the IFRS, I think that we can be par to other major players. We are very close to that level. So the strategy that we have now, we'd like to make sure we maintain them and enhance them. And as a result, I think we can realize that. Thank you.

Thank you very much. To your second question, Kasai would like to answer.

Thank you very much for your question. Yes, in creating the ecosystem, whether we have the good achievement and how -- what kind of potential does the data have in our industry? The first point, first of all, it's not the data per se, but in terms of ecosystem, the digitization of the nursing care providers is one of the challenges that we recognized in Japan. So from that perspective, Future Care Lab in Japan was opened in February 2019. And here the nursing care service different technologies -- introducing the different technologies, actually the validation based on the safety and efficacy can be done. So this is something that we can use for other companies' products. But our health ministry has a living lab project and evaluation of the new technology, living lab projects, I think there are 4 different places and our facility is one of them. So this is our efforts being approved by the Ministry of Health and also by the municipalities. In this lab, there are many public sector people and private sector people touring our lab. So we are recognizing how important this type of facility is. As for the data potential, yes, in 2021, in April, the benefit of the nursing care insurance was changed and the ministry came up with the policy. Scientific nursing care was one of the major items. So the -- we should utilize the data coming from the nursing care so that we can improve the quality. So this is -- the name of this system is called Life. So the government is trying to collect the data from the nursing care providers so that they can generate value. So this is one of the initiatives that the government is working on. So our efforts, we have started this in a preemptive manner and working with this Life and working with the government, we believe that we can generate a major value. As you pointed out, the nursing care industry is labor-intensive. But still, there are a lot of opportunities where we can improve the productivity. So Page 30 might be difficult for you to see, but the scoring based on the data can be done. So new quality or some improvements of QoL or physical capability, how to maintain it, we can visualize it using data. So this is something that we can realize. We are confident, and we expect this to happen. And the government is also looking at this. It's not just experience, but the evidence. It's not depending on the workers' experience or intuition instincts. So based on the evidence, if you provide this type of care, you can expect this type of outcome. And we can collect big data to prove it so that they can be fed back to the providers. So that's what is happening. So this is something that we can do. And this would also -- this is also very important for the further development of our industry.

Mr. Niwa, thank you so much. Now it is close to the ending time, so we'd like to take one last question. Mitsubishi UFJ Morgan Stanley Securities Corporation Limited, Ms. Tsujino.

My first question is on the life business. Earlier, you mentioned that the third category -- third sector, the Insurhealth, you are trying to promote the sales of Insurhealth-related products. And in the last fiscal year, this is not exactly the same KPI, but in the third sector, annualized premium, new business year-on-year is showing 12% increase. In the whole industry, it varies. Some players increased -- annualized new premiums of the third sector increased so much, some did not see an increase. So you performed relatively well in the industry. But other years leading up to the last year, compared to peers, your performance did not differ so much. Results were quite similar among the peers. So in that sense, what made a difference? What was a big factor last year? So if you can explain a little bit more on that. In the new medium-term management plan for 3 years, new -- varied from the new business up to last year, you are achieving this level of growth, but you are trying to achieve much higher growth in the new midterm management plan. So would you please give me more concrete examples? In specific categories, you grew nicely. In some categories, you did not grow as much. So you started this new midterm plan in April already. So what are the specific channels that are outperforming and doing very well? My second question is on the nursing care business. We've been talking about Slide 27, which is real data platform. So you are making a good progress, as you mentioned. But we've been hearing this explanation from the past, but we don't know yet at this point what is the exact data that you are getting? And what specific initiatives have you started? What are the areas that you haven't been able to start? And what are the actual areas that you are feeding back to the real business? By leveraging know-hows, what are the things that you've been able to do? To the extent that you can, would you please give me more color?

Tsujino san, thank you so much for your question. To your first question about the life business, let me answer that question. Insurhealth products, it's not limited to the third sector. It includes the first sector as well. Regardless of the category, the debt protection and health care service are combined, bundled. That's a definition of Insurhealth. For example, in the first sector, the health challenge, which is the income compensation insurance, which is the first sector, this is to protect the compensation. This is to protect the income in the health challenge. So I would like to grow the Insurhealth, not only in the third sector, but also in the first sector as well. In 2020, as you asked, we increased the Insurhealth sales mix to 60%. What is the biggest contributor? In FY 2020, the medical insurance, which is the third sector, we have the main product in that category. It represented 48% of the new business. So the third sector, or the medical, in 2020, we converted that to Insurhealth. In addition to the traditional coverage, we combined health care service. We call it new medical policy. In June 2020, we launched this new product, which represents -- about 50% of the new business is the medical. So we converted that to Insurhealth. And amid the COVID environment, we performed very well after the launch that pushed the mix of Insurhealth policies. That's the biggest contributor. Down the road, I would like to increase the ratio to 80% within the current medium-term management plan period. In this fiscal year, in October, we are going to launch cancer policy in Japan. Cancer policy has high awareness towards the needs among Japanese people. On October 2, we are going to convert the cancer policy to Insurhealth by providing a bundled cancer policy with health care service. And we are currently in the stage of explaining the design of the product to customers. We are getting good feedback. And the progress of that new policy will enhance the Insurhealth sales mix furthermore, we believe. This completes my answer. Thank you so much.

Tsujino san, thank you so much for your questions. Let me answer your question about the nursing care business. As we mentioned correctly, you said you couldn't see the clear picture of RDP, so let me report the progress that we are making in more detail. First, in facilities of Sompo Care, we have the day-to-day business operational data that we input on the daily basis to whom we provide what services. We make a plan, and we confirm in the data of the record whether we have been able to provide services as planned. So we have the data on 20,000 residents. Every day, we can accumulate the data on 20,000 users. In addition to that data, we get vital data. For example, we have the Nemuri SCAN, which is the scan in the room of users to measure the number of sleep hours and the pulse and the breath. Using the sensing technology, we can get the vital data. And also due to the COVID environment, we measure the temperature -- body temperature every day. So we get the body temperature data, and we provide meals every day. So depending upon their health datas, sometimes they cannot eat the meal fully. So we input the diet data. So we have various pieces of data that we can get from nursing care facilities. So leveraging that data, together with Palantir, we are analyzing the data. From the last fiscal year, we started to use the data to identify what additional values we can add on to the services in 5 facilities, specifically. For example, as the operation of the facility, the gap between the plan and actual of the nursing care plan is one example. We started the dashboard on which we give feedback to the manager of the facility every day. And one particular support, in some cases, we give support as planned. In other cases, our staffs cannot give support as planned. There are residents who need other supports, supports that are not included in the plan. So what is the gap that we have to close? We are trying to visualize the gap so that we improve the quality of the services. If there is a large gap, then for those specific care solutions, then assessment on the resident, like the health status, what is the better way to make a plan? Is there anything that we can improve in the process of making a plan to improve the quality of the services? And we are getting a good feeling on what we can improve. And probably, this is something that can be helpful to other operators, too. So we'd like to package valuable solutions and provide to other operators to improve the quality of the service and productivity of the service. This completes my answer.

Tsujino san, did you get the answers you expected?

If that's the case, in the medium-term management plan, your data business, you are not assuming any impact on the product. JPY 1 billion is a plug-in number that you have put in place in the midterm plan. But in reality, towards the end of the midterm plan period, are you going to provide solutions to non-Sompo Group care providers in the industry? As long as there are needs, you'll be able to provide those solutions to other operators. You are going to see the prospect of starting to provide those solutions to those other operators. Am I right in understanding that way?

Thank you so much. Yes, that's right. In fact, creating the ecosystem, we are getting advice from Palantir. But we'd like to seek partners with whom we can work together to create the ecosystem. If we provide on the services that only Sompo Care can use, it cannot create ecosystem. So in the early stage, based upon the data, we'd like to provide good products and solutions that we can provide to other operators, and we are trying to seek the partner to create those solutions. So we'd like to work with other companies to make them into products so that we can provide it to other operators.

Our time is up so we'd like to close today's IR meeting. If you have any follow-up questions, please contact IR team. Thank you very much indeed for joining us today. [Statements in English on this transcript were spoken by an interpreter present on the live call.]