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

Thank you. So this is Sakurada of Sompo Holdings. On May 20, we announced the results of FY '21 and guidance for this fiscal year. In this meeting, I hope that you will confirm our progress of MTMP announced last year as well as a road map to achieve next year's plan through constructive discussions. I will first explain the overall strategy of Sampo Group. And then Okumura, COO, will present business strategy. And after the presentation, we will have Q&A. Please go to Page 3. As you may already know, we have renewed our executive team. Last September, Jim, who is sitting next to me, assumed CEO position of Overseas Insurance and Reinsurance business. In April this year, Okumura became Group COO; and Shirakawa, Domestic P&C business CEO; and Endo, Nursing Care and Seniors Business CEO. We are aiming at becoming a solution provider beyond the insurance category, while keeping more than 130 years old DNA to solve social issues, we will offer more valuable social contributions through our business activities. For that, we are proud that we have realized the best deployment of executive team. Each new appointment was, of course, based on the succession plan by the Nomination Committee chaired by an outside director. Please move on to Page 4. This is the outline of today's presentation. FY 2021 marks the second consecutive record high profit. The first year of Sompo Group's MTMP made a good start. In order to achieve our key strategies, namely Scale and Distribution and New Customer Value Creation, the 3 priority initiatives: DX and RDP in the growth investment and conglomerate premium generation are stronger measures, which I will explain in depth later on. In addition, it is a matter of course, that SDGs and ESG are important to create new customer values. And driving force for these strategies are our employees. In the work style reform, we aim at creating a virtuous cycle of each employee's engagement and happiness linked to the improvement of corporate value. And for shareholders who are important stakeholders, we will grow profit and improve ROE to make shareholders return more attractive. Please move on to Page 6. These are management numerical targets. In short, everything is on right track toward fiscal year 2023. Page 7. This is the road map for FY '23, which is the last year of the current MTMP. In fiscal year '21, transitory factors such as COVID pushed up profit level. Without those factors, our real performance is reflected in JPY 220 billion of adjusted consolidated profit. Growth drivers from here to JPY 260 billion in FY '22 and at least JPY 300 billion in FY '23, earnings structure reform of Domestic P&C business and strong revenue increase of Overseas Insurance and Reinsurance business, both of them are making steady progress, and there is no blind spot in our planned execution. We can achieve our plan through organic growth. However, additional initiatives such as DX, digital transformation. Growth investment and the creation of conglomerate premium will further improve profit momentum, raising probability of us achieving the plan for FY '23 and further buildup of results. I will come back on these initiatives later. Page 8, scale expansion. Recently, premiums written showed a stronger growth of 6% of CAGR driven by stronger growth in overseas business. Page 9. This page illustrates another strategy diversification. The left-hand side graph shows changes in adjusted consolidated profit, net premiums written and the group risk amount. During this period, we steadily reduce risks, realized growth of Overseas Insurance business and improved the group's business portfolio. We underwrote more risks, in particular, of casualty and specialty line, diversifying business lines. Our effort is still halfway through, but our portfolio is changing in such a way to reduce uncertainty and stabilize the bottom line. Page 10, please. The second basic strategy is new customer value creation. DX, digital transformation is the core of growth strategy of each business contributing to increased business value. DX based initiatives for differentiation will improve quantity and quality of real data to construct RDP real data platform. We have been arguing that for the success of RDP, in addition to Sompo's uniqueness and the differentiating factors to inhibit imitation, it is necessary, most of all, to create indispensable and urgently needed ecosystem for society. In particular, the initiatives in nursing care and health care domain where expanding Japanese social security cost is emerging as a serious social issue is the futon of the process. We are steadily progressing on necessary initiatives to transform ourselves into our platform through nursing care RDP. Please move on to Page 11. This is the DX status of each business. Some economic impacts are shown in the yen figures. I think that not many companies show numerical values on the level that we do. For example, underwriting, leveraging Palantir's capability and the improvement of business expenses through enhanced productivity are good examples of showing DX contributing steadily to the bottom line. Of course, it is important to accelerate these DX initiatives to increase earnings as well as to deliver new values and services to the customers. So I think the differentiation factor here is speed. Page 12. This is business model for nursing care RDP. In Japan, there are 60,000 nursing care operators with the combined market share of 3 largest ones being less than 5%. So it is a very segmented market -- For 70% of the operators, digitalization such as data acquisition using sensors or operational systems is not progressing. It is expected that in 2040, there will be a shortfall of about 700,000 carriers. So there is demand-supply gap. And it is a very certain prediction. And even with the remaining 30% of the operators, it is indispensable to further advance data utilization. Nursing care is an essential work, which involves services provided only by human beings such as offering meals. There are urgent needs in care facilities for support for such services as well. For these issues, we are planning to provide a packaged solution combining nursing care RDP, which is under development, with additional values such as support for digitalization and business process. We believe that addressable market consists of about 7,000 companies and about 14,000 care facilities. We will show expected the price and profitability at a later date, and we are making preparations for that. Page 13, please. Development status of nursing care RDP product. There are 2 phases in this development. And the first phase is for visible nursing care by integrating dispersed data. It is about our product to institutionalize accumulated know-how. For example, unexpected excretion takes up most of the time of carers, making it a long-standing issue in the nursing care industry. The product we develop in this phase is a solution for this particular issue. The operation of our care facility has been dependent on experience and intuition of seasoned care workers. By visualizing and comparing the schedule of excretion care and the past care records, it becomes possible to optimize timing and frequency of care and to find opportunities for improvement. This is a product to directly contribute to quality of life of users and to productivity of facilities. We are currently in the demonstration phase with our partner company and planning to launch this product within fiscal year '22. In the second phase, we are developing an app for predictable nursing care. We use and analyze more than 500 data per user, including changes in weight and volume of meals for the total 30,000 users of our own care facilities. Using the app, care status can be visualized at scores to predict the care status, for example, in 3 months. We have started pilot operations at 2 facilities of our own. Following demonstration and verification by our partner company, we are planning to launch this product in FY '23. Please move on to Page 14. Nursing care RDP initiatives and future prospects. While the first users of our products will be nursing care operators, we are also reviewing other markets and possibilities. For example, participate in demonstration by the central government, develop a home care model using nursing care, medical and admin data of local governments and realize sustainable nursing care system collaborating with central and local governments. This is an extremely important social issue, not only at home but also abroad. And Sompo Group is committed to make utmost efforts for that goal. We will collaborate with special businesses such as welfare equipment. For the future, we envision exposing our solution overseas, we will expand the business in various markets and monetize as the size of business grows. We believe that this nursing care RDP development and business know-how can be applied to health care and mobility, as such, we will think about different ways of its deployment. Please move on to Page 15. The third basic strategy is new workstyle. As we discussed last time, we believe that each employee pursuing his or her purpose clearing the objectives of work style reform one by one and raising the level of their engagement will lead to the realization of Sompo's Purpose, which in turn will increase corporate value. We are very certain of that. As shown in the middle, we have worked on various initiatives. We have executed necessary investment in infrastructure for remote operation of call center and systems investment for paperless operation with work style -- with flexible choice of location being a new normal, some financial effects were generated, such as business expense reduction by several billions of yen, as shown on the right-hand side, Page 16. So Page 16. This is Sompo's approach to sustainable growth. Each of the ESG is being firmly addressed. Regarding the E, the environment, as a concrete measure of some climate action, we have set a greenhouse gas reduction target for our industries from this fiscal year. We will also work to strengthen underwriting restrictions and lead to the transition to a carbon-neutral society. We believe that our efforts to realize purpose will lead to future financial value, which we refer to as unrealized financial value. So driven by my purpose, Sompo's Purpose management is to increase unrealized financial value and enhance corporate value, and we will present the progress of such efforts in an easy-to-understand manner to investors and other stakeholders. Please turn to Page 17. It's about risk reduction. Cross-shareholding has been steadily reduced as planned, and the reduction of domestic interest rate risk has been extremely successful. These risk reductions or capital release are the basis for improving capital efficiency, and we will ensure that they are implemented. Please see Page 18. So next is about growth investment, an important option for directing internally raised capital through risk reduction. Well, we continue to have a high appetite for growth investments and are examining possibilities on many fronts. We shall consider steady diversification efforts like bolt-on, digital investments for the future and sometimes bold and large-scale investments. We would like to be agile and make the best possible moves to allocate the capital as the occasion demands. The bottom row shows the status of the acquisition of the former Endurance. Well, as you know, Sompo International has become a growth driver for our company. And for this fiscal year, at least JPY 100 billion level in profit from overseas insurance business is in scope. We have achieved a certain level of ROI on this acquisition, and we would like to continue to build on this successful deal going forward. Also this week, on the 24th, we decided to spin-off and sell our Brazilian consumer business, what has been announced already. We expect to see more benefits from our collaboration with SI in the specialty sector than ever before. So this is a strategy to improve the profitability more in efficient manner. So please see Page 19. It's about one of the important factors, which is shareholder return. As you recognize, we have been giving back well and steadily make the size of our dividend hike bigger. We intend to continue to increase dividends based on profit growth and also raised the payout ratio as well as improved profit stability. Well, of course, I myself see our stock price as still undervalued. So we will work on share buybacks with attractive shareholder returns. Now let us move on to Page 20. Well, lastly, from me, let me show you the track record of EPS. We believe that our efforts to improve capital efficiency and the profitability have borne fruit, leading to steady EPS growth. We would like to make it even stronger and aim higher. So please stay tuned. This is all from me. And now I hand over to Okumura, COO and the new President. And here on, he will explain our business strategy.

Well, I am Okumura, Group COO. Now I'd like to explain our business strategy. First, Page 22 shows the progress of KPIs in the Domestic P&C business Well, due to the effects of the key initiatives of earnings structure reform, adjusted profit for FY 2023 is expected to exceed JPY 150 billion. Details are supplemented on the following pages. So please turn to Page 23. The first part of earnings structure reform is pricing optimization. In the nutshell, well, this is the measures taken by the entire market. Well due in part to the recent increase in the number of and severity of natural disasters, the aggravation of the fire insurance market has been quite clear so that in the entire industry, the rate optimization is underway. Here in Japan, which is prone to natural disasters, in order to provide security and safety on a stable basis, we need to work on this. However, it's not a mere increase. We carefully need to explain the background of the revision to our customers and then make appropriate proposals to ensure optimal coverage. Thanks in part to these careful responses, the E/I loss ratio for the fire insurance improved steadily, as you see. And we wanted to make the progress on this initiative. Let's see Page 24. So next is initiatives on underwriting. This underwriting as a word is used quite broadly. And here in one word, you're talking about the individual, especially the corporate policies with high loss, the initiatives that we are taking for them. And that initiatives will -- DX was related, as Sakurada mentioned. That point is the technology of our strategic partner, Palantir, to reengineer our business process. So this is really a DX progress. The response to the customers with high loss, we've been making some progress. But under the collaboration of Palantir, we are speeding up extracting those policies with high loss ratio. Well, in the beginning, we have focused upon the fire insurance with that large size policies. But the technology of foundry of the Palantir technology, we were able to broaden our scope to the SMEs and also to other lines other than the fire insurance. So with that expansion of lines and also for the longer term to look at the number of policies in target have been expanding more. So extraction itself is by the use of the technology of Palantir. But Being able to do so at an earlier possibility will make it possible for users and the agent to come up with the optimal proposals and also explain better for the customers for the raised hike and then that leads to the better profitability. And recently, met the release about working together with Hitachi for the insurance policies using quantum computers. Well, sometimes there was a limitation of speeding up of the optimization of the earthquake policy and the facultative reinsurance when we are working only manually. The final portion is going to be done by manually by human intervention, but the portfolio will be able to be ceased at an earlier possibility. So there will be a fusion of the manual handling as well as the DX or the technology. And then on the next Page 25, we are talking about the improving profitability of productivity. We have worked upon the reforming and revisiting the efficiency in this one as a part of the productivity enhancement initiative. And one example is AI utilization in response to accident, which is scheduled to start in November '22. This is a part of DX. Well, there is an accident, we make the analysis much further because, first of all, we can have the initial response and then damage investigation to be handled separately. We will start by automating simple cases first. But by speedily delegating to machines, what can be done by machines. We will know that what needs to be done by humans. And those things that needs to be done by humans, will be done by humans. And as a result, we aim not only to reduce workload, but also to improve the quality of customer service to provide. In a year, we are making the steady progress ending FY '22 and '23, we'd like to see more effect to deliver from that. Now on Page 26, we are talking about overseas insurance business. As was mentioned also, in a nutshell, is going quite steadily, especially the SI's gross premiums written, we are achieving the budget 2 years ahead of the schedule. Now Page 27. This shows SI Commercial's net premiums written. The agriculture insurance of Diversified, which was acquired, which was began to be consolidated since FY '21 and the higher than planned rate hikes, have contributed significantly to the revenue growth. And this has been speedily working upon. And by the FY 2021, over 80% of the rate has been increased. So under such an environment, the optimal resource allocation and also the volume of the holding to increase has expanded our business. As a result, loss ratio was improved. And the loss ratio and expense ratio has had the steady improvement. So as a result, in FY '21, '22 and FY -- towards the year 2023, we think we'll be able to expect more. On Page 28, we are talking about the expansion of the scale and also diversification. In the section -- This section compares the composition of the portfolio by line of insurance in FY '17, the first year of SI Commercial's consolidation and in FY '21, showing the tripling the size over the past 4 years. The catastrophe portfolio, weight has been becoming smaller. So you can see that there's been much more controlled for a natural disaster risk and less volatile. This is a result of pursuing for the efficiency and also the reduction in the loss ratios. Now moving on to Page 31. This is the progress on KPIs, the key KPIs in the domestic life insurance business. The biggest driver of life insurance is Insurhealth at Himawari Life, which is highly profitable. Insurhealth is the insurance and the health care. Well, this is to back up the people who are willing to become more healthy. With the utilization of the digital, we would like to meet the expectation of the customers who want to become more healthy. So as a result, this is highly profitable. And also with the connection with the customers, we are meeting the needs of the customers, which will lead to the higher retention rate. And as a result, it contributes to the corporate value enhancement. Let's move on to the next page, Page 32. On the left-hand side chart shows it's an Insurhealth profitability, and you see how high that is. And on Page 34, it's about the Nursing Care & Seniors business? Well, Sakurada already mentioned briefly, so I would say DX and RDP have been making the progress. But even now, the occupancy rate is increasing. I myself, for 2 years under this COVID environment, I was in overseas, not in Japan. So I was watching Japan from overseas. And I see that nursing care business is having the sincere care for the nursing care needs. And for overseas, a lot of people actually -- unfortunately died. And after becoming infected, there are some support provided from the upside, especially from the headquarters, and we see that such a progress and initiative has also been taken by ourselves. So that situation has become better. And so we are making the investments faster at the earliest stage so that we are starting to see that effect on the bottom line, I believe. Please move on to Page 36. It's a summary. Within the current midterm plan, I think the keys are still the completion of earnings structure reform in the Domestic P&C and the expansion of scale in overseas insurance business. And also we should target at the realization of Sampo's Purpose so that in the nursing care business and also the other businesses, we need to expand the corporate value and also the value creation for the customers. And each business have been thinking about and the tackling was the corporate value enhancement. But mostly, as a holding company, well, we need to deliver the conglomerate premium. So please turn to Page 37. Well, here, there is a description of the conglomerate premium, and I'd like to talk about this. What the executives in Sakurada-san and myself, we have been discussing quite long for the roles and the responsibility of the holdings. And we thought that there are mainly 3 roles for the Sompo Group. One is to formulate the group's mission and strategy and get them penetrated across the group. The second is to set appropriate targets and allocate management resources -- the necessary resources to operating companies. And the 3 is to generate conglomerate premium or group synergies. And the conglomerate premium is the responsibility of the execution of the Sompo Group. So that under my own responsibility, we will -- I will ensure that we will make the progress. So the first phase is the one Sompo project that we launched. As a group, we want to enhance the brands and also educate people and grow people. But within some time frame, we want to get the fruits. So especially this time, there are 3 domains to focus: investment, retention and session and global network, which is multinational business. The concept is in a nutshell. Both the operating companies under the holdings are now working upon enhancing corporate value, and that led to the risk diversification and the scale expansion. Based on that, assuming that when we become one company to have one balance sheet, then the optimal portfolio should be thought. What kind of risk return we should pursue? The same thing should be discussed for the underwriting. By using the group balance sheet, what kind of holding would be the best for us to continue? With that, what kind of reinsurance strategy is going to be needed? That needs to be pursued. And the global network that will be starting from Japan. Well, it's not only the company that would be starting from Japan, but starting from the U.S., starting from Europe, what kind of things we are going to be providing for the customers, what kind of networks we need to establish as a platform? Well, we are going to do so in a certain time frame. Within the discussion with a variety of stakeholders, maybe we get some feedback, like let's focus on the stability of the profitability. If that's the feedback, then if we are talking about the risk return of today, we think we'll be able to get the triple-digit growth and profitability to achieve in FY 2023. So in each operating business and the holdings, they'll become one entity, where one for the higher corporate value. So the profit target that we have set forth is going to be the one that we will aim into that time period. Thank you very much.

[Interpreted] Thank you. Now we would like to move on to Q&A session. So from SMBC Nikko Securities, Muraki-san, please.

[Interpreted] Muraki from SMBC Nikko. First, the Domestic P&C and the improvement of the earnings. I'd need a clarification. On Page 11, DX effect and some quantification is shown here, thank you for that. And for the underwriting, less than JPY 10 billion, that's how I interpret. But on Page 24, using foundry of Palantir, am I right to understand that this is about JPY 10 billion is related to that Palantir initiative? And also Page 22, 91.7% combined ratio, how probable, how likely that you realize this number? In -- 1 year ago, you said 91.7% and the other securities firms personnel said that it is too low. But the fire insurance, the price optimization -- is much faster than your expectation. So in 1 year, how are you looking at this 91.7%? My second question, as Mr. Okumura said, at the end, the conglomerate premium, it's a very interesting point of argument. Compared to [indiscernible] players, as you already know, credit risk overseas -- credit risk take overseas is very small in your case. And also, the utilization of reinsurance within the group and as to the retention policy, I think there is some gap. So diversification effect and ROE improvement from that perspective, could you please elaborate more on the choices in front of you that you're reviewing? And recently, some insurance companies in different regions are trying to share IT platform or most of the platform. It's a very ambitious initiative. I am not certain yet whether it will be successful. But as to such initiative, I understand that you have been doing that to some extent. But as to the sharing of the platform, is it something realistic that you would like to undertake?

[Interpreted] Shirakawa, CEO of Domestic P&C. So the underwriting and the DX, I'd like to cover DX in a wide sense. So the last year of MTMP, about JPY 15 billion, the impact on the bottom line, that's what we are aiming at. The breakdown is as follows. From underwriting initiatives, about JPY 7 billion. And with the personnel cost reduction based on DX, JPY 8 billion impact. So as to underwriting JPY 7 billion impact, as Mr. Okumura said, the fire insurance, in other words, high loss via the policies and the revisit of those policies. Not only fire but also the other casualty and liability, and we will expand this underwriting effort to those lines as well, including that JPY 7 billion impact. As to personnel cost reduction, as Mr. Okumura said, via the claims section and the repair done, checked by AI, by the repetition of such initiatives, JPY 8 billion impact is expected. As to your next question about the combined ratio. Basically, on the longer run, as to automobile insurance, we expect that the market will improve gradually. As to fire insurance, with the price rate hike, the other core driver being the rate improvement, the combined ratio is expected to improve. More specifically, for FY 2021, 93.5%, and 93.7% 2022, the same level. But there's the absence of the changes in the automobile accident due to the other -- COVID. For fiscal year 2023, we aim at 91.7%. So the gap with the number of '22 is 2 points. I would like to explain about this gap of 2 points. First of all, the depreciation and amortization of our core system, [indiscernible] will be compensated by the earnings structure improvement. So the breakdown of 2 points is 1 point coming from fire insurance and 0.5 points from the decreased automobile accident ratio, and the rest is coming from the top line increase of the casualty and other business lines. So the market share improvement we keep one. So with that trust, we will aim at increasing the top line and growth. thank you.

[Interpreted] Muraki-san, I would like to answer your question about the conglomerate premium. So compared to global peer, we are not taking so much credit risk. We are rather on a conservative side, you're right. As a group rather than taking credit risks, we wanted to strengthen underwriting, which is our strength and take more risks there. So when you look at overseas business, we take underwriting risks and expand underwriting gains. And about reinsurance, the utilization of reinsurance within the group, we are thinking about it. But it is probably the next stage. Without making new platform within the group, how much risks should be taken, where? And the risks taken by each business are not really optimal. And if we pursue the best scenario for the group, how we are going to make adjust it and the small working group is now working on that. And Jim Shea, sitting next to me, is very deeply involved in that. And if necessary, he can make also some comments later. And as to conglomerate premium, so for the whole group, we look at the duration for the whole group, and we think about the best asset allocation and the group optimal insurance and reinsurance will also be revisited. As to IT platform, I'm not sure if I'm the best person to answer that question. But based on my experience, it seems very difficult, especially when we have consumer business overseas. The systems acquired, the regulations are different from country to country. So whether we can share the basic system. In my experience, there are more cases of failures than successes. But as to DX, it could be effective when we share for the whole group. But more prudent on the IT systems sharing. Jim, if you have any additional comments for the reinsurance platform.

As for the reinsurance platform, I think it is a real opportunity for us, not only in how do we maximize the net retention based upon group appetite. But how do we have a consistent appetite across all geographies. So our customers see one sample appetite factoring in local statutory entities and net retentions. From -- the other benefit I see on the reinsurance is how we manage our reinsurance partners and how we manage our distribution partners on a global basis. And so we are seeing in the market as 1 organization and not 2. And I think that is a tremendous opportunity for the group over the medium to long term. In terms of IT platforms, I think we should be as common as possible, but as local and distinct as necessary. And particularly when we look at reinsurance or we look at multinational customers, the platform in which we service and support those customers is the same. And so we should be looking to be as consistent as possible across all geographies.

[Interpreted] Let's move on to Mitsubishi UFJ Morgan Stanley, Tsujino-san.

[Interpreted] I have 2 questions. The first question is for Sompo International, the top line growth is remarkable. Well, the rate increase effect was probably quite big for the top line growth. And in the future, maybe the rate hike might continue. However, the rate up speed might slow down. And with the rate increase, you have been acquiring from the new lines as well. So how the new policies have been acquired in which domains in the past, if you could briefly talk about that, that will be helpful. And going forward, -- do you think that is sustainable, the acquisition of each line of businesses from many domains? And if you could give some color on that, I appreciate it very much. Because some people said, like, okay, liability is increasing. But the casualty does include liability. But from our standpoint, that covers so much a broader topic. So I don't -- I really wanted to know the color on that. And the second question is regarding the improvement that is coming from -- the profit improvement coming from the rate increase. Well, especially when we are dealing with the large-sized customers, the large-sized corporate, how is it making the progress for the rate increase? You were talking about that will be done in conjunction with the underwriting. But probably in the different aspects, when you think about the rate hike for the large-sized corporate customers, is the environment allow you to do that much easier? If you could give some examples from the past, I would appreciate it very much as well.

[Interpreted] Tsujino-san, thank you very much. So the first question is about SI and the second one is about domestic business. That was my understanding. Is that correct? Okay. So the first question regarding SI, I'd like to talk about the past. And also, I'd like to hand over to Jim for the future. As you mentioned, the rate increase has been steadily making the progress, but now we are starting to see some slowdown. In fiscal '22 in the first quarter that is going to probably go beyond that loss cost going to the double digit. But compared to the FY '20, it's slowing down. So in that environment, in the past, for example, the bolt-on M&A for expanding the surety in the last year, we had AgriSompo expansion and also aviation company acquisition. Well, through them, we have been expanding the lines and also the geography. As a result, in a nutshell, not only property but casualty had increased. That was an explanation. And which kind of a geography we think we can give you much more in details. And also right before the acquisition of Endurance, GRS was launched. That was for the insurance for the U.S. companies. That's a property and casualty directly reaching out to the customers. That was the business model. And in the last 5 years, we have increased by about JPY 100 billion in that business course. And for the reinsurance as well, those are renewal and also the new acquisitions of the policies, so we have increased just like the holding or the insurance businesses. By expanding the businesses of the European side of the businesses, we have expanded the business in that, of course. And we have Jim coming from Bermuda, I think I'd like Jim to answer that question as well for the future.

The future, I do believe there is an opportunity for us to continue the expansion of the business. When you mentioned rate increases and top line growth, the market has plenty of top line growth available to all players. It's the bottom line impact that we need to make sure we are focused on. And I think while rate increase is easy to track, what has been more important in terms of the contribution to profitability has been risk selection and the terms and conditions that we're able to write into the policy forms. And so those, as a combination with the rate have helped to drive the profitability. As Okumura-san said, we've continued to invest in new areas and the growth that you see over the past in 2021 reflected strong commodity prices in the agri sample business as well as the annualization of the acquisition. When I look going forward, I see opportunities in geographical expansion into places we -- or in segments within the United States, expanding into the middle market, expanding into new geographies. And in Continental Europe, our focus has been primarily on the reinsurance side and our business is primarily based in the U.K., and we are looking to expand and have sample represented across the continent. So the opportunity for us to continue to see growth despite the slowdown in rate I think is there for a number of years to come. But the focus will remain on the bottom line, and that is a combination of rate risk selection and terms and conditions.

[Interpreted] Well, your second question about the Domestic P&C. The question was, well you were referring to the large corporate customers. But it's not only for the large-sized customers, but I think the idea that we have is the initiative to take for the SMEs as well. Especially for SMEs, the data regarding one policy is limited, but the number or the volume of policies of SMEs are quite big. In FY 2021, about 1 million policies of the SME was analyzed as a DX data. It's not a single year policies, but about the last 10 years that we have gone through as a data analysis for 1 million policies. Now talking about our relation with the large corporate customers, the path to data is available, of course. But in case of the large corporate, the volume of data per policy is also quite big. So that volume and also the result from the past all needs to be analyzed. And in the past, what we used to do is that we did everything manually with human intervention. So that deciding the policy for one policy was time consuming. But now that the foundry is available to use, as I mentioned earlier, even if we are dealing with 1 million policies over the past 10 years, we'll be able to get the conclusion within a few hours. Well, compared to what we used to do in the past, we are going through a big transformation. Well, what kind of data trend extraction was possible was really dealt with, with the DX. But if we are dealing with that large-sized corporate, as Okumura-san was talking about, the computing analysis will be used. And the scheme for the [indiscernible] will be also reviewed. So we think we'll be able to deliver fruit.

[Interpreted] So the initiatives for the large-sized companies will making a proposition and changes the rate or more like the things into the future. Is that correct?

[Interpreted] When we talk about the earnings structure reform, we have started that since FY 2019. But actually, we have asked the large companies to review the policies and also the rates, and that has made the progress. And the fruit has already been born until FY '21. And if we're going to further develop the new technology needs to be used. As I mentioned earlier, in the reinsurance domain, for example. So together with that, we shall make the further effort to get the profitability. So we have already harvested some results.

[Interpreted] Next, Watanabe-san from Daiwa Securities.

[Interpreted] Watanabe from Daiwa Securities. I have 2 questions. On Page 19, shareholders' return as to the increase in the payout of dividend by JPY 50, it's shown for the fiscal year 2023. How probable is it? And how about FY '24 and beyond, any comments on that? And as to additional benefit payout, about JPY 50 billion of the other excess the earnings and there will be some buybacks. There were some buybacks because of that. And what is your current understanding of the other excess earnings? And as to underwriting ratio, because of the COVID and the war and the risks are emerging, as Sakurada-san said, we are living in the age of [indiscernible]. So you have been containing losses, partly because of the good regional mix. Could you please talk about what you're strong in containing the risks?

[Interpreted] Hamada, CFO. As to shareholders' return. I would like to take up the question. FY 2022, we accelerated the increase of the dividend payout by JPY 50. Would the adjusted profit will be flattish from FY 2021, but actually, we have been -- we would like to increase it. So when we develop the plan for 2022, the number was JPY 250 billion or so. And in 1 year or so, we can add on it's [ JPY 10 billion ] on that. So that's why we increased the dividend by JPY 42 -- by JPY 50. And we cannot say anything for sure for the future. But when we decide on the JPY 50, we thought that we can increase it by another JPY 50 for FY 2023. And we could say that from simulation. So we are growing very steadily. So the JPY 50 can be is likely to be maintained for 2023. And for 2024 and onward, we cannot make any commitments here. But a not payout ratio, but the total shareholders' return ratio is the key that we are looking at. And our shares are still undervalued, and there is some economic reasoning for the share buyback to some extent, but the share prices are rising. And when that happens, we would like to focus more on the dividend payout. So please count on us. As to excess capital, so FY 2021 is gone, and we had some upside bigger than expected. And the additional -- the return was on the table at the end of the year. But looking at the current capital status, of course, profit has been built up. But for example, some international growth drove the risk volume to some extent. And we need to look at financial markets. So the FY 2022, the JPY 600 billion, the gross investment. And based on that, how much capital we need? And those numbers that we looked at 1 year ago, remain unchanged more or less. So this time, we do not have any additional shareholders' return. As to second question, the underwriting disciplines, Jim, the next part for overseas business. But on that side, that I worked for SI for 2 years or so. And in short, SI Commercial is an underwriting company. I think it is appropriate to say that. As Jim said, it's not about rates, but risk selection. And terms and conditions are reviewed, so you operate only in the area of your strength. It's very disciplined. And if you go beyond that, you need ammunition, like people or the DX digital technology. If not, you do not go beyond that line. So compared to other companies, you said, it's really difficult to compare with other companies. But it was the right timing within the pandemic, some peers struggled with the capitalization. And we had Endurance in the group, which provided the capital buffer. And when the market became tight, we could go made a step -- we could make a step to expand our business. So Jim, any additional comments on underwriting?

I think you hit the key elements, I believe it is certainty of contract. And we saw many of our peers suffered from market or manuscript contract wordings in -- particularly in Continental Europe. I also believe it was driven by a risk selection and segment selection. If you look at many of the losses in the industry, a lot came from the consumer and SME segment in Continental Europe, of which we are not a large player. And so that combination of strong risk selection and contract wordings, the segments that we operate in, and I believe a strong and conservative approach to the acquisition of reinsurance contributed to the positive results in everything that we've experienced and continue to experience, and I think it will hold well for us going forward and to maintain that position in the future.

[Interpreted] That's very clear. The next is Mizuho Securities. Sato-san, please.

[Interpreted] This is Sato of Mizuho Securities. Well, 2 questions from me. The first one is about the growth investments. For the current midterm plan, you are setting a JPY 600 billion. So one question is about the outlook for that JPY 600 billion. You showed the progress, which was JPY 75 billion. For the fiscal year that ended, there was another large one, I think. But in your case, when you were setting up the level of the investments, at least you're disclosing that, and also for the probability of hitting that in the final year, you were talking about the organic growth in the JPY 30 billion organic growth. So the probability of using that, of course, we should not set the figure, first of all, but when we look at the valuation of today, how hard that is or how difficult that is, if you could give some color on that. And the second is about you did not talk about the mobility lines. Well, including the auto insurance, the mobility side, if you have any outlook for that mobility-related businesses. I'm not talking about -- if the -- it comes to the Phase 5 of the development, what is going to happen. But for example, Tesla was -- the CEO of Tesla was talking about -- now we're talking about insurance or the [ Torres ] platform. They are probably going to see some time frame sometime in the foreseeable future for the a 100% auto driving. And then you're talking about Tier 4 and the region that you have the business alliance, the partnership that you've concluded last year. So there will be some opportunities or the threat as well for you, for the mobility side or auto side as well. So that's my second question.

[Interpreted] Sato-san, thank you very much for your questions. First of all, it's about the growth investments. So let me briefly answer. As we described on the Year 1, it was JPY 75 billion level of the capital used. And we have more headroom. Well, every quarter, the top executives are confirming the progress. In April, we have the meeting, and overseas business is, of course, not to mention, but the nursing care digital business and the P&C in the domestic, we have shared some opinions about all the plans and projects and they need to have some more capital. What Sato-san said, we should not be really having all the request objectives, we have to have discipline. But for the growth investments, it's not that we have nowhere to make an investment -- no, it's not the case. Well, rather, what's quite difficult for me to look at is that like an insurance M&A or there are some investments that we can measure ROI now. And also, there are some investments that we will seek for the future return. So there are quite different types of what kind of return we would expect for. So we need to look at that much more in details in balancing act. Though, as Hamada-san mentioned, I'd like to add some, especially for overseas, we do have some prospective deals but because of the balance with the other possible deals and also the disciplines, we have been having the discussion with the overseas business owner that's there were much more headroom left that we go into the -- some regions, especially the investment in the human talents. Somewhere between bolt-on, we could probably capture the team to seize the opportunities for growth. So we're thinking about the utilization of the capital in that regard. So whichever the case is, the appetite for growth is quite strong from each business owner. In the meantime, discipline is very important. So we need to get the balance to benefit from the investment for the corporate value. And Sato-san, your second question is about the mobility. It's not about the auto insurance, but you were talking about the mobility business in the future. Is that your question?

[Interpreted] Yes. My question is about the future. The carmaker side are willing to maybe disrupt the existing auto insurance. In the meantime, your site is like Tier 4 or the auto insurance telematics area have been the area that you've been working upon for alliance or the partnership. So I'm not really talking about the overall picture, but I'm interested in knowing how you want to play out in that field.

[Interpreted] Okay. Maybe Shirakawa-san and Narasaki-san are the best to answer.

[Interpreted] Okay. Now I'd like to answer first of all. As Sato-san mentioned, if we're going to work upon for the case of [indiscernible], maybe the size of the accident or the case of the accidents have been -- will be changing and the relation with the customers may change as well. And even if the business model changes, we need to get the preparedness to respond to that immediately. So the innovation of the core system or the Tier 4 and the mobility area investment will be quite necessary, and we are preparing for that. And for Tier 4, it's not only the auto driving function, but the volume amount -- the large volume of the data is the scheme that we are able to enjoy. So the real data will be used and for us to reform the new business model. Now Narasaki-san, anything to add?

[Interpreted] Well, this is Narasaki. So just to bolt on what Shirakawa-san mentioned, I would say what we're going to do for the mobility field. Well, in your question you mentioned that carmakers are probably going to disrupt the insurance side, the existing insurance. But I would rather say the carmakers are probably having something that is not fully utilized, but we want to fully utilize those that are not in use now. I mean I'm talking about the data, like behavior of the drivers or the traffic conditions or the car parts and composite value in terms of the market price, those data are not necessarily used fully. So the mobility industry or the car-making industries probably have more gold mine. So by the utilization of Palantir, we are trying to work on that. And one of the formal business is with Wejo. This week, we went to the headquarters of Wejo to have the meetings, and they are very aggressive in the global automobile industry, mobile industry, the company like us and Wejo could work on various other things. And Shirakawa-san just mentioned about data utilization, but that will be fed back to the auto driving system. In the future, the auto driving is going to be properly done on the hybrid style for the time being. The hybrid, meaning that people will drive it. And also the auto driving is going to exchange information between the 2 to formulate the mobility into the future, and we want to be playing the role in the center of that. That's how we want to develop the business.

[Interpreted] Sasaki-san, please, from Bank of America Securities.

[Interpreted] Sasaki of Bank of America Securities. I need a clarification for the contents of the presentation. The nursing care business, new product launch is coming up, you said. To use this product, expenses is embedded in the nursing care mechanism or not? And as to the Domestic P&C business, the utilization of content computing, I think probably you talked about earthquake, the insurance -- for the corporate clients. Do you think that it's something to lead you to taking up earthquake risks in Japan?

Here's Endo, the CEO of Nursing Care & Seniors business. As to RDP and nursing care, could you please repeat that question?

[Interpreted] For RDP, you are launching a product for RDP, I understand. And when the operator uses it, is it covered by the nursing care insurance?

[Interpreted] Understood. As Mr. Sakurada said, the nursing care industry in Japan is undergoing the age of transformation. In 2000, the nursing care insurance started, only 22 years past. And it has always been the manual the work by the carers, it's just the extension of the family carers. But about the 700,000 will be in the shortfall according to the meeting. And on December 20, the cabinet office in its committee talked about the deregulation of the nursing care. I was there in the meeting with the introduction of digital technology to raise the labor productivity. Because at residential share, there should be on carer for 3 users and it is not sustainable. So 1 versus 3, this rule should be deregulated, we made that proposition. And in -- from June this year, promoted by the meeting -- from the Welfare Ministry, rather, the model operation will start. And the Sompo Care that will be there, will participate in that initiative. So that how the collaboration or harmonization between the digital and the humans that will be achieved, and we have 6 months to show it. And the digital technology introduction is one of the key words. And not only that, this -- the nursing care RDP, why is it necessary? For Sompo Care, the mission is as follows. There are about 80,000 users of Sompo Care. Every day, they provide data recorded, how they live and the status of cognition and the meals. The high volume of data is provided and we use the foundry of Palantir to analyze the data to come up with some apps. Finally, the government and the Ministry of Health understand the same way as we do. And FY 2025, there will be some revision coming up for nursing care. The specifics are yet to be worked out. 60,000 data operators, they should operate in a sustainable manner. And the government is finally giving some thoughts to that. And I would like to add the following as well, for Sompo Care, the nursing carers and care managers and the other staff have been using their experience to come up with plan for carers. And if you look at Page 12, this diagram on this page, in the middle, the predictable nursing care. So the other health data, cognition, the behavior, ADL, the app in 3 months, for example, that app is almost available, almost completed. And using that for 60,000 operators, we are going to sell that product. And there are 15 different apps are being developed. So we are not -- we are now at the point of change for the industry, and we would like to play an important role there and that is our ambition. So 60,000 operators, there are many operators without systems platform. So we can help them to build a digital platform. And nursing care RDP and base -- applications based on that RDP can be provided. But not only that, so what would be the specific plan for a certain user, such a solution can be provided. So it is going to be the full package of solutions. We are going to talk more about specifics in the IR meeting in November. Please come to this. Thank you. Thank you for the question.

[Interpreted] So the next is...

[Interpreted] So this is Shirakawa. So the DX using quantum computing. As you said, the retention level of the ask rate insurance will be optimized to reduced reinsurance cost. That is becoming visible. So your understanding is right. At the same time, this technology combined with Palantir's technology to be applied to the natural disasters or to the overall portfolio of Sampo, that's what we are doing in a parallel manner.

[Interpreted] Sasaki-san, maybe you're on mute.

[Interpreted] So about the Japanese earthquake risks, you are going to increase the retention level?

[Interpreted] It's not increasing retention level, optimize it, optimize the facultative reinsurance. That's what we are aiming at. We are not saying that we are going to increase the retained volume of earthquakes. We would like to create the optimal combination of retention level and reinsurance. Thank you.

[Interpreted] One more thing. So JPY 600 billion for growth investment. Under the current plan, if there is the remainder of the JPY 600 billion, how are you going to use this capital, remaining capital?

[Interpreted] Let me take up that question. We have not made any decision yet. We are doing some exercises on it. If we do not use up JPY 600 billion completely, probably from the end of this fiscal year, we were going to start the process to develop the 2024 and onwards midterm plan, new midterm plan. So organic growth to FY '23, can we achieve the other goals, what about the financial soundness at a certain point and the investment appetite for the next midterm plan? We are going to have such discussions. And in 1 year, in May, the IR meeting, we can be more -- we might be more clearer about those points. I think, as follows. So what amount are we talking about? At least what is most important is ROE, at least 10%, the capital level, which allows us to keep that level. According to the current simulation, JPY 300 billion adjusted profit achieved by organic, then the order -- dozens of billions of yen should be reversed to reach [ 10% ]. And [ 10% ], is it's satisfactory? Every year, we accumulate the capital and how -- what is the pace of the build up of profit and what is the level of investment, and we are going to look at all of these things, and we are going to decide on how much the reversal should be there. And that's the understanding right now.

[Interpreted] Now Majima-san from Tokai Tokyo, please.

[Interpreted] Well, this is Majima speaking. Well, you were talking about purpose. So I have a question about purpose. You have been talking about the Theme park to provide the security, safety and the well-being. Well, among the investors and the analysts, I think that theme concept has been penetrating more. But in order to get that across in the normal community, then you have to talk about something that goes aligned with the social contribution, which is the image of the nursing care. So probably the image would be like simple name, would be the image of the nursing care but the other social contribution may not be reminded by the other people. I'm too worried about that because of the too strong image about that side of the purpose. And also, are there any alignment between My Purpose and the company's purpose? Those are 2 questions.

[Interpreted] Okay. So Sakurada is going to answer that question.

[Interpreted] Well, we actually want to be really famous about that social contribution. We think the first driver has to be really emphasized because the nursing care business doesn't exist anywhere in the world. But in Japan, the government is now taking an initiative with some budget and the resources. But in the U.S., that's perfectly catered towards the private sector, meaning the public companies taking care of it, not the government. But whichever the case, well towards the purpose -- towards the secure and safe community and the society, not only in the advanced countries, we think the nursing care is going to be much more important. Well, Japan, of course, without going [indiscernible] and also the U.S., those people who are working on the nursing care are -- in the U.S. are like the currently working people, so they are working and also doing the nursing care or maybe the same for the China as well. So when we are talking about the promotion of the Theme park of the safety, security and the welfare in the community. Well, your question is that whether Sompo's name is going to be highly renowned for the nursing care. But we, as a Sompo Group, we shall make up the image in the society and then prove what we can do in what we can do. So as to your question, I do understand your concern and I understand why you asked that question. But once we deliver that and become the company, then we think that will drive us to become the business with the P&C business and the other insurance and other businesses. And also, as we heard from other speakers, we were talking about the life insurance, P&C business and overseas business, well, we get 2 things from all business units. One is, of course, the profit or cash. The other is data. And those 2 are going to be an important resource, increasingly important into the future. So by utilizing those resources, we shall do the troubleshooting for the society. So Sompo is no longer an insurance company, but it's a company founded based upon the insurance business, but the company to make a contribution to solve the social issues. So I think the image that you have is going to be quite important, and I want people to have that image about our company. To do so, all the staff or the employment has to have a clear understanding of why they are working. We want them to revisit that. So that's the reason why we started Town Hall. And we've conducted 7 times already, the first time was starting in September. And we are also planning to have some more from now on. Well, by using the web remote system, we've been having the direct contact with more than 10,000 workers. Now I joined the company about 40 years ago. And unlike that time, when I joined the company, my life and the company's life was almost equal, but it's no longer the case, no longer the scenario. When we talk about the sustainable company, it's -- the value that we had in the past cannot be consistent with the value for today. So first of all, there is a life of each individual workers and they have something that they want to aim at, the purpose that they work for. And in order to realize their purpose, there is a Sampo group. That is a concept that we want to communicate. So at least the people who join our company, their life purpose is that they want to make themselves happy but not only that, they want to make happy the people around them, including their families. So that's the big and a strong purpose that our people have. And if they go closer and get crossed with the company's purpose, then that will make our company as a Theme park for security, safety and well-being. I think that will be the largest driver and the strongest driver. And I have to say this for investors that the largest stakeholder is the employees. And that -- with that, we think we can make the value proposition and the return to shareholders. So thank you very much for your question.

[Interpreted] Next, Niwa-san from Citigroup Securities.

[Interpreted] Here is Niwa from Citi Securities. Can you hear me?

Yes, I can hear you.

Two questions. The global corporate business and the other equity investment. First, on Page 37, multinational business expansion. It's very interesting. My question is as follows. The current position and your expansion going forward, what kind of metrics should we look at? I imagine that probably multinational companies, international programs by global peers or captive insurance in its number and the number of risk engineers or the global -- the wallet share and so on. To see what kind of metrics are important to understand your positioning and what is the time line to reach a certain goal, could you please make some comments on that? And if there is any missing part there, what is it? You talked about SME's functions required. How much investment? At what time line is in your mind? And another question is on Page 41, equity investment. Strategically holding stocks are being reduced, I understand that. And your interest remains the same. There are some discussions about lead shareholders in Japan. I think that there is a high expectation for financial institutions. Do you think that the insurance companies are different from that? Or deleveraging the characteristics of the liability of insurance company, are we going to increase your equity investment? What is your thought on equity exposure? Any changes from the past? Could you please elaborate on that point?

[Interpreted] Niwa-san, thank you. As to global companies in multinational, I'd like to talk about the outline. And when it comes to global companies, Jim has been leading the team. I'd like him to make some comments as well. As you know, in our group, we are dealing with Japanese companies. And when those Japanese companies operate overseas, we support them. So it's a very -- it involved manual work, a lot of it. But in expanding overseas business, not only Japanese companies, but also German or the U.S. customers became our customers as well. Using our network in Japan and the overseas network, there are some gaps or overlapping parts that we are revisiting that gap. At this moment, we do not have any specific KPIs. But the time line and KPIs will be determined. The number of customers, at least, or the gross written premium or the level of satisfaction on the part of the customers will be candidates for our KPIs. Jim, any comments, please?

I think it's very important for any global insurance company to be able to support its customers as they operate outside of their home country. And as the insurance regulation becomes more complicated, and as companies become more global, it's an opportunity for us to be able to support not just Japanese multinational companies, but all companies and all customers, small, medium and large. And the universe of companies that operate in this space is much smaller. And so the opportunity of investing in digital platforms to help us provide a support and service that can leapfrog some of the technology that exists today will help position us well for the future. I think as Okumura-san said, there will be many KPIs that we can look at, but I think it's -- ultimately, it's the bottom line and the combined ratio that we look to make to do this and to do this in a profitable way.

[Interpreted] As to strategically held shares and policy, the conclusion is as follows. There is no change in our thinking, the JPY 150 billion reduction in the current plan, that's our aim. Probably, the growth investment, depending on those deals, we can speed up the process. On the fair value basis, the market value basis, we have been reducing the holding of strategically held shares. And in the interest rate environment, we have slowed down the pace from this midterm plan period. So generally speaking, it is strategically held shares. So strategically, part is wrong. So it's no strategic held, the equity holding would not be a problem. Basically, in our year, we would like to reduce volatility. And there is no change in our basic policy to reduce strategically held shares. Thank you.

[Interpreted] Sakamaki-san from Nomura Securities.

[Interpreted] This is Sakamaki of Nomura Securities. Well, 1 question, please, because of the time constraint. On Page 18, optimized portfolio is 1 question I have. Well, the consumer of the Brazil company, well, you made the decision of spinning that off and then sell. What kind of discussion took place internally to come to that decision? And can we expect to have the selling off of those disposition of the businesses, which is still making a profit? I just wanted to know the concept and the thoughts from the management team.

[Interpreted] Thank you very much, Sakamaki-san. Well, the consumer business in Brazil was decided to be sold off. And this discussion actually when I was in-charge of the corporate planning, we have had the discussion with Sakurada-san. And for the future, we could probably do if we can get the higher corporate value, then we could continue the business. But if not, then we should just think about the proposal. So the pulling off from this Brazilian consumer business is something that I have really -- personally have to be hesitant. However, thinking about the market environment and our positioning and the capability were all considered. And the conclusion was that it was very hard to stick back the advantage for ourselves. So the management meeting at the holding and also the Brazilian consumer business supporting sites, the Sompo International executive members, we all got into the discussion and we discussed thoroughly. And then we, of course, had discussed with Jim fly over to Brazil, had the repeated discussion and we gained the understanding of [indiscernible] executives. At the time, Tajiri-san, who was in Turkey at the time, had come over to Brazil as well. So we, as 1 team, had come up to this conclusion and completed the deal. Well, and myself would say that for the future, we shall pursue the corporate value enhancement. So we need to understand the external environment and the clear -- to clarify what we want to attain, then we should work on the core competency to pursue. Jim, do you want to add something?

That -- there was a very thorough review of the portfolio and the business, not only our business in Brazil, but the Brazilian marketplace. And unlike a commercial business, in a consumer business in order to be relevant in a particular market, you need to have a certain level of scale, you need to be positioned in the top 3 to 5 companies and be able to drive change in that marketplace. And we felt that this was the best course of action for us given the size that we were in Brazil and the overall socioeconomic situation in that marketplace, not only today, but as in the foreseeable future.

[Interpreted] Yes. Okay. Thank you very much. Now we've already passed the time. But lastly, through the chat, [indiscernible] has 1 question who is covering to us. So I'd like to read out his question. Sompo International's agricultural insurance, I'd like to know the current situation of that crop business and also the strategy for the expansion of that crop business. So Jim, can you probably take this question?

The situation is that we have fully integrated the acquisition into Sompo International. We have integrated a leader, Mr. Bob Haney, who is part of the leadership and executive team within Sompo International. And we continue to be a market leader in the United States. We look to expand where it makes sense, either through acquisition or through our reinsurance vehicles, and expand that business outside of the United States. We continue to look at different opportunities and we will continue to keep that as a core strategy for our business in the foreseeable future.

[Interpreted] Thank you very much. So with that, now I would like to wrap up today's session. If there's any additional questions, please contact our IR team. So thank you very much for joining this session today. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]