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

[Interpreted] This is Hamada speaking. Thank you for joining us today. Please open to Page 3 in the presentation. On May 28, we had an IR meeting, and we already communicated the contents, but I would like to remind you of the details once again. As you can see at the top, our purpose at Sompo is for a future of health, well-being and financial protection. So this has been redefined. Over the medium term, we would like to have a P&C business that is a dedicated and highly efficient and offer solutions in order to cater to people's concerns around retirement money. And over the next 3 years, what we would like to do -- as you know, on adjusted consolidated ROE basis, we are striving to reach 13% to 15% and also adjusted EPS growth of CAGR, 12% plus. We would like to enhance resilience even more and connect with customers and deliver connected services. External environment's volatility is heightening. So centering around the P&C business, resilience is becoming increasingly important. And up until now, we used to have a business order system, and that is how we were exerting governance. But we would like to connect over a long term with our customers even more going forward. In the other day regarding this -- the meeting, of the contents we have touched base with our executives once again, on the left, these are group common strategies regarding our finance strategy, whether it be about remittance or the ESR target or discipline around growth investments as well as sales of strategic holdings. So various financial strategies will be combined in order to promote capital circulation. And in order to enhance diversity as well as the expertise, we will be investing into our talent under a budget of JPY 30 billion. And we would like to also promote data-driven management. Based off data, we would like to ensure that we manage our business well. So these are things we are discussing. So regarding the details, we have already announced this plan. But today, we are going to be covering the right-hand side. I talk -- 3 business segments are going to be focus for the next 3 years, which is new Sompo Japan overseas and well-being. That is how we are going to promote our business. Today, in the following parts, we respected the original presentations of each of the businesses. The passion of the heads of the businesses will be delivered. So that's all for me. Thank you very much.

[Interpreted] Thank you, Mr. Hamada. So now I'd like to start the first part that is the Domestic P&C Insurance business.

[Interpreted] Hello, everyone. Thank you for coming to the business-by-business IR meeting today. First the CEO, which is myself, will talk about the Domestic P&C Insurance business. In May, we had an IR meeting, and we talked about strategies as well as KPIs regarding our business. But for today, we would like to give you a detailed presentation around SJ-R so that you can enhance your understanding and give you a sense of how we're going to -- planning to achieve profit recovery and how we are going to become an increasingly profitable company. So I hope you can get a firm understanding around that. So I'd like to go straight into the presentation. So I am moving on to Page 2 -- or Page 5 in the presentation deck. So first of all, this is a reminder. But in the new midterm management plan, this is the overview of SJ-R. So enhancing resilience and profitability is what we were going to be working on. The slogan is dedicated to customers and society. The basic strategy is to pursue uniqueness and resilience. By the end of fiscal '26, Sompo Japan would like to pursue uniqueness and resilience. So that will be our focus over the next 3 years. As you can see at the bottom -- diagram at the bottom, we have 2 wheels that support our company. So we first have the earnings structure that contributes to our financials, which is on the left. So underwriting portfolio reforms as well as sales reforms as well as claims service reform or areas on the left, that is going to be part of our operations reform. And then on the circle on the right-hand side, these are nonfinancial aspects. But over the medium to long term, they will definitely start to contribute to our earnings. So this is about reforming our operating foundation whether it be through cultural change or strengthening quality management and governance. And each of the circles are not independent from one another. In the middle, they connect, so it's basically circulating, and we will able to enhance our competitiveness through this. And through the earnings structure reform, we will be able to reinvest the earnings into reforming our operating foundation so that we could be reborn into a New Sompo Japan. Next page, please. So next, I'd like to talk about the KPIs of the new midterm management plan. SJ-R will focus and reinforce not only profitability in a single fiscal year but also on the stability of earnings and the agility to respond to changes in environment in a flexible and timely manner. First, regarding profitability. As you can see in the middle, in fiscal '26, we are striving to reach ROE of 8% or more, or a combined ratio of 95% or less. From a stability stand point, which is what we are focusing on, we are not focusing on profitability in a single fiscal year, but we would like stability over the long term. So what we mean by this is if you look at the middle right, we would like to control our top risks. As you know, top risks in Japan would be natural disasters or typhoon risks. We will strive to control line size or set deductibles so that we could either maintain or reduce typhoon risks. And also for strategic shareholdings, we will strive to reduce by JPY 600 billion or more so that necessary capital can be reduced. And we will improve flexibility as well. And regarding flexibility, I will walk you through the details later. But in short, we would like to reduce in a material manner long-term contracts. Please turn to the next page. So regarding profitability improvement and the certainty of achieving the targets is analyzed here. So at the end of fiscal '26, we would like to achieve a combined ratio of going below 95%. And regarding how we are going to achieve this is analyzed here. First, around JPY 70 billion worth of rate revision effects are expected. We would like to ensure that we are able to achieve this. In addition to this, regarding our core strategy, we would like to engage in micro segmentation underwriting and have thorough management of our portfolio and continue to make improvements so that we could generate an additional JPY 17 billion of earnings. So it will be a total of JPY 87 billion of an improvement that we're expecting. And for fiscal '26, we view this as a passing point. So through the impact from SJ-R, we believe that the profitability of Sompo Japan will enhance even more. So regarding our portfolio reform strategy, which is one of our important strategies, I would like to walk you through the details here. So in short, we would like to have a thorough management of earnings by segment. And based off that, we would like to strengthen our underwriting. Up until now for poor-performing policies or contracts, we were engaging in countermeasures or we were focused on overall profit management for all the contracts, but we would like to change this so that we do profit management in a different dimension. If you look at the diagram in the middle of the slide, the left-hand side shows what we were doing in the past, where we were looking at specific policies or clients or we're doing broad management of the portfolio. So it was in 2 extremes. But our goal is on the right-hand side, which is, by segment, we would like to decide on what we are going to increase and what we are going to reduce in exposure at the end of fiscal '23 by segment. We color coded the segments in blue, gray and red. So for the good segment, which is blue, by the end of fiscal '26, we would like to bring this up to close to 40%. But for the segment that is subject to improvement or reduction, which is in red, we would like to reduce our exposure to about 20%, which is to reduce or improve profitability. This is a management line segment and portfolio reform. So for portfolio reform, up until now, there has been some areas that we were already working on. So what we have been doing is, if you look at the bottom of the slide, for the old properties, where there is a lot of typhoons and so forth, the ratio of old properties among new business is what we've been trying to reduce as well as the number of in-force solar power generation facility contracts as well as ratio solar power generation facilities contracts with theft deductible are areas that we've been focusing on to reduce our exposure. And through these measures, we have been able to turn the fire insurance business into a profitable business. So we would like to ensure we do increasingly disciplined underwriting so as to enhance our profitability even more. Another thing that is very important in achieving the KPIs for fiscal '26 is that in the past 2 MTMPs, natural disasters increased very rapidly and also more recently, the impact of the inflation expanded due to the changes of the economic environment. As a result, there have been waves of huge changes, and we need to work on our organizational structure to respond to those rapid changes. So toward FY '26, of course, that we created the profitability improvement plan but if the quick changes in the environment happens again, you might be concerned that we won't be able to achieve the targets and our response is as follows. So once again, we believe that it's important to enhance our structure. On the left-hand side in the middle, you see the loss in relation to the natural disasters as shown in graph and the average was JPY 68 billion during the '12 to '17 and it has exceeded after that period. And also, the auto repair cost has been rising because of the inflation every year. And at the same time, the bottom on the left, in our case, the ratio of the long-term contract is high. So for example, the case of fire insurance, it's 90%; in auto, 60%. So those are the long-term contracts. So that means that the premium rate change or even if we try to change the scheme, it takes time before the effect of that is actually reflected. So we would like to reduce the ratio of the long-term contracts. That's one of our strategies. In addition, the product development speed needs to be improved. So core system called [ MIRAI ] is being renewed. And with this, we can shorten the product development time down to 50%. So with this, we should be able to agilely develop the product, so we will be improving the resilience by improving the lead time for the product development. Next page, please. And new -- in order to realize new Sompo Japan, we will look into the core operation reform. So first of all, in the area of the sales, there are 2 major things. One is to eliminate the dual structure with agents. On the left-hand side, we are talking about this problem, a current challenge or the challenge that we have had for a long time is that insurance have given excessive support to the agent operations. So we would like to end that so that our relationship with agents would be healthier. And as for our initiatives within FY '24, we would have a dialogue and discussion with all the agents about this improvement. And as a result, if we would revise the agent commission system to reflect the operational levels and also if the elimination of the dual structure is not possible, we would probably reflect that into the agent commission and restrict the LOB. Another major part is shown on the right-hand side. That is the back-office operation optimization. So as of the challenges, as you can see on this slide, with the fewer population, it is difficult to have a sufficient manpower or the rules and the complexity of the procedures, we have become more dependent on the few people with skills. So we would like to concentrate the operations to the back offices in 7 areas in Japan. And as a result of it, we would like to expedite the paperless and move to fully cashless and standardize and digitalize the operations. And through this, we would like to reduce the number -- the back-office activities of the sales branches by 15%. And so first, we will try to eliminate the dual structure and the second, the back office activities and operations optimization. And we would spend the time that we can save for retail sales and commercial sales. So in the retail sales, we will try to have a efficient and stable provision of the high-quality and uniform services. In the commercial sales, we'll try to provide comprehensive risk solutions through the division of duties and enhanced specialization. Another aspect of the core operation reform, this is a very important initiative of SJ-R, and that is the core service reform that we have been working on. So we are trying to learn from the innovative operation know-how of the overseas groups, and we are trying to change the model of the core operation. In the middle, we have explanation here. So this is the example of the Sompo Sigorta in Turkey, and they have very much advanced operation, so we are looking into our operation, referring to the Sompo Sigorta's methods. The red is Sompo Japan. The blue dots represent Sompo Sigorta in Turkey. So it is very clear that in terms of efficiency and the claim detection and the payment adequacy and also the claim service process, there is a huge gap between the 2. So we'd like to utilize the know-how of Sompo Sigorta so that we can make changes in our own operation. One of the example is shown at the bottom. So currently, at Sompo Japan, each organization by geographical area or prefectures and also within the area, we have different organizations. So there are different things that they need to do and the complexity level are different. And the level of the serviceable claims are quite different, and this leads to the lack of uniformity. So using the know-how by Sigorta, we like to change it into the to-be status on the right-hand side. So we'd like to use the digital technology so that we can visualize the capacity, and we can flexibly allocate the resources. And also for the fraudulent claims, we will have specialist teams providing support. So this is important reform, and we will have -- we will be able to enhance our capability in dealing with the fraudulent claim detection and payment adequacy. And with this, our expected result is the combined ratio of minus 0.5 point. Moving on to the next page. The last topic or -- is the initiative in pursuit of the uniqueness and further growth. I'd like to briefly explain this. So on the left-hand side, we have a direct strategy. How do we promote the direct strategy? So at Sompo Japan, we have agents, and we also have a direct approach. So it's a hybrid model. So in the group company, there is Sompo Direct. And the 1st of October, they will be changing the name to Sompo Direct. So this Sompo Direct is in the area of the direct business. It's ranked #2. And as one of the insurance major player, the -- we also have Mysurance, which is the small-scale digital-only company. So we'll be working together. And on the right-hand side, we are showing the strengthening of the alliances. So with RIZAP Group, we have signed the alliance. So it shows we will be very aggressively pursuing the alliance with other companies. So other companies and also within the Sompo Group, we would like to collaborate more with other companies so that we can improve our added value and also maximize the group synergy. And about the RIZAP alliance, this -- as a first step, we will be launching the special chocoZAP services to the members of the Sompo Park. So in this way, we will pursue and promote the various alliances that would contribute to enhance the value that we can offer. And with that, I'd like to end my presentation. Thank you for your attention.

[Interpreted] Thank you, Mr. Ishikawa. Now we would like to take any questions that you may have.

[Interpreted] Mr. [ Sasaki ] from Nomura Securities then.

[Interpreted] This is [ Sasaki ] from Nomura Securities. I have 2 questions. First one is about Page 7 in the presentation. I would like to enhance my understanding. For rate revisions, you talked about JPY 70 billion of an improvement that you're expecting but you have JPY 2 trillion of net premium income written. So I would say the price revision is in the order of about 3% for auto insurance and fire insurance. What are your thoughts? Are you thinking about rate increases of 5% or 6%, which is my point of view? Can you confirm this? And if it's possible, for fire and auto insurance and price revisions down the road, can you talk about the scale and the magnitude that you are expecting? That's my first question. And for the second question, Page 8, for the diagram on the right-hand side, you're talking about changing your portfolio. That's what you explained. For the red portion and the gray portion and the blue portion for net premiums written, you give us a breakdown. What is the profit mix? And how is that profit contribution going to change? So if it's possible, can you talk about how the portfolio reform is going to impact the bottom line in both positive and negative, please?

[Interpreted] Mr. [ Sasaki ], thank you for your question. For rate revisions, we do state JPY 70 billion of impact is expected. What is scheduled is in October this year, fire insurance and next year, in January, auto insurance of rate revisions are scheduled. And because of the product attributes and the -- for the rate revision magnitude, Mr. Tezen will give you some details later. So maybe we should answer that part first.

[Interpreted] I am in charge of products. My name is Tezen. For the outlook on rate revisions and our plan, I would like to explain as much as possible. First, for fire, in October, we are planning a rate revision and we have already communicated with the agents. Regarding the magnitude as covered in the press, it's around 10% more or less, so it's not just a simple rate revision. 1-year rolling style renewals is expected and depending on industry, we have been doing it with discipline. So the average is 10%, but it will differ policyholder by policyholder. Regarding automobile insurance, as you know, we didn't do a rate revision in January this year. As you know, we've been seeing inflation around the automobile market, and we are expecting a rise in labor rates. And for loss rates, we are anticipating that this fiscal year is going to be flat. From that point of view, we were originally anticipating and planning for a 3% rate revision, but now we are thinking that, that may not be sufficient. Therefore, we are considering to do a greater rate revision now.

[Interpreted] So regarding your second question, for the portfolio reform part, Mr. [ Yamamoto ], would you like to take this question? Or for -- Mr. Tezen, you can take that one as well.

[Interpreted] Like you've said, so this is on a written premium basis. For the red portion, it's basically a classification where it's not profitable or it is not generating the expected profitability, meaning the loss ratio is higher than expected, and the middle portion is neutral and the left portion is profitable. So I can't give you an actual amount. However by fiscal '26 by having some constraints on some segments and doing disciplined underwriting, the profit contribution, we hope, will be about 2% from these efforts. So all in all, I can't break it down by pricing or underwriting constraints. It's really hard to carve each of the aspects out. But on an EI basis, we would like to strive for an improvement of 2%. That will be the impact on the bottom line.

[Interpreted] So for the portfolio, we would like to basically increase the good performing segment. And for high loss parts, we would like to reduce it by 2%. But we believe this is basically the core part of our business, meaning the -- reducing the red part and making it more neutral and going -- having it included into the 40% part, we would like to do loss prevention measures as well as engaging in mitigating natural disasters and preventing natural disasters. And we believe this is one of our social missions, so whether it be various -- we would like to communicate with our clients and our corporate customers so that we can engage in these reforms. And we would like to ensure that we are able to enhance the trust we gain and establish a good relationship with our client base. So those are the changes we would like to make.

[Interpreted] One follow-up question I have is you said 2%, but EI basis premium profit improvement is what you're expecting. So is that about worth JPY 30 billion to JPY 40 billion?

[Interpreted] Well rate revisions and portfolio reform is going to be done in a one package or in one set. So we can't break it down. However, in our portfolio strategy, we are going to be doing more micro management, and that is the expected improvement through these efforts.

[Interpreted] And I apologize if I'm asking too much. But on Page 8, right-hand side and the red portion, is it right to understand that they are loss-making? And if it's loss-making, governance-wise, continue to underwrite these policies, I think by looking at this business from the outside, is questionable. But is that right or not?

[Interpreted] Well, it says under the star, the definition of segment differs by line of business. So for fire, if it's long-term old policies, some are structurally loss-making, meaning there are some policies that haven't reached renewals. But for auto insurance, it might be onetime deterioration of profitability as well. So those policies are all included. So it's a mix of various types of policies. Basically, for fire rate revisions and auto rate revisions, by segment, we will be improving the design of the product so that our profitability can improve. But because of the Insurance Business Law, there is a limit to what we can do. So for certain classifications and regions, there will be some segments that will continue to be poor performing. So then it will be about sales policies as well as terms that we will include in the underwriting process in order to improve the performance.

[Interpreted] And if I may add a little more, this is Tajiri speaking. SJ-R overall, what we are intending on doing is that we would like to raise overall rates. And then the loss ratio may reach our expected loss rate, meaning if top line increases, profits will also -- should also increase. That's where we used to be. However, the volatility has been heightening. So even if we increase rates, the profitability hasn't improved as much. And those kind of instances may expand going forward. So we would like to improve by JPY 70 billion through rate revisions, but whether our profits are going to improve by the same degree is a question mark, which applies not just to us but to Japan overall because of higher volatility. So what we're trying to do here is, first, we need to clarify what our appetite is, not just the loss ratio. So we need to check to see whether premiums are in accordance with the level of risk or if profits are generated in line with the business expenses we are spending. So what we want to expand or what we want to contract, even if they are not loss-making right now, we may want to contract some lines of businesses. And by risk by LOB, we clarified that. We went through an exercise. So by clarifying this and by line of business, we have determined in detail what we want to expand or contract. So by going through this exercise, we may have increased our rates according to plan. And even if our profit doesn't go up in the same degree, if we are able to reform our portfolio, we will be able to reduce the volatility. So this is actually a matter, of course, overseas, clarifying the appetite expanding or reducing the portfolio. And when you're expanding the portfolio, what are you going to do? Are you going to reduce the poor performing portfolio and just raise the rates? No, it's also about looking at the conditions and terms and making the portfolio better and setting targets around the portfolio as you engage in marketing activities. So I think it's the first time we are trying to engage in this kind of reform. So I hope you understand.

[Interpreted] If I may add on Page 8 regarding the red part that requires improvement, as Mr. Tezen explained, by line of business, the definitions differ. But in short, it's not just for the loss-making businesses that are included here. We have a target combined ratio. There are some policies that haven't reached that combined ratio, which are also included in this needs improvement segment, which is the red portion. So for portfolio reform overall, one thing you can say is high-quality cover is what we would like to supply in a steady manner. We have a social mission, and we would like to fulfill this mission. Also, at the same time, we would like to maximize underwriting profit and do these things in a balanced manner. So this is what we would like to attempt to do. That's all from me. Thank you.

[Interpreted] Thank you Mr. [ Sasaki ]. So over here, we have already received some questions beforehand, so we would like to handle some of those questions. First question, on Page 7 about the expenses, the temporary expense burden is going to be increasing temporarily. So could you talk about the content of that? And what would be the effect of this portion? So there was a question concerning the expenses. So like you, the management team to answer this question.

[Interpreted] That is the expenses, the second from the left, right, on this page? Yes. [ Yamamoto-san ], probably you can answer.

[Interpreted] Yes. This is [ Yamamoto ]. For this time, SJ-R, as we explained, we are making some investments. For example, the consolidation of the branch offices and also the -- setting up the sites for the centralization and also some investments in relation to securing the land and so forth and also the depreciation in relation to the [ MIRAI ] and the new system development, all of those are included. And part of that is due to the inflation. Especially the system maintenance repair, that cost is also included. But of them are the -- some of the investments -- upfront investment in relation to SJ-R.

[Interpreted] So about the investments, the core system, [ MIRAI ], there are various investments that we are making. So in that sense API, alliance, and also, as we explained, the products and the rate revision, we want to do that more frequently. So that investment is also included in the expenses.

[Interpreted] Thank you. Another question that we received beforehand is as follows. So it's about the sales reform. So more recently, the strategic holding -- shareholdings have been sold, and that's one of the sales reform. And at the frontline, what are the initiatives being taken? And are you seeing some of the effect of those efforts? That was another question that we received, so we would appreciate if you can answer to this question.

[Interpreted] Yes, about the domestic sales as a whole, we have Mr. [ Yamaguchi ], who is responsible.

[Interpreted] Yes, I am [ Yamaguchi ], in charge of sales. Well, about the sales reform in the area of the retail and also the commercial, there are 2 different areas. And in -- as for the retail, so there are some restrictions that we are faced with. And also the market itself is shrinking to some extent. So under those circumstances, the sales personnel in the retail sales, we want to improve their productivity. So for example, schedule management and the management of the activities of the salespeople, we like to improve the productivity and also the administrative operation of the sales branch offices needs to be improved. And also, we would like to have a -- the uniform level of the high-quality service quality. And as for the commercial sales, as Ishikawa-san explained, still there is a lot of room for further growth. So through the division of duties and enhancing the specialization, we want to achieve good results.

[Interpreted] If I may add just a little bit, as you all know, big motor incident occurred and the premium rate revision was necessary. So of course, there are the individual issues of the companies, but as an industry, how we do sales, the common sense in the insurance industry, probably people thought that it's different from the common sense in the society. So instead of having the strategic shareholding, we would like to increase the share or getting the top line instead of buying the customer share, so that has been until now. And that is not the common sense in the society, and we have seen some issues because of this. So now we really have to focus on the true sense of the sales activities. And what means that the product lineup and services and the quality of the products need to be improved. And so in retail, until now, there were a dual structure. The things that the agents needed to do was done by us and we want to eliminate that. And instead for the retail customers, we want to provide brand-new services. So that's one thing. And in the corporate sector to evaluate the risks and understand the risks and we want to be able to make the proposals to avoid the risks. We want to enhance our specialization. So we want to do all this. It's not the one person can do everything, but rather, we would like our division of duties and specialization, and we would like to make an investment as a company to promote them. So I think that we will have such competition in our industry. So this is really the true area or the capability of the salespeople that we want to improve upon.

[Interpreted] And right now, the directors, there are 158 branch offices, and by the end of July, we will be visiting all of those sites. And we have town hall meetings and the reaction to this meeting, as Tajiri-san said, until now, there were dual structure issues and other things that should not be done by the insurers were done by the insurance. And also, there was an issue of the strategic shareholding and too much support was given. So in noninsurance areas, we were spending a long time and making a lot of effort. So we have learned bitter lessons from this. And so we'd like to focus more the true work of insurance companies. So we have high expectations because now we can concentrate on what we do. So we want to improve the specialization and as Hamada-san explained at the outset, as Sompo Group, JPY 30 billion investment for the human resources. We have such fund, so we want to utilize that so that we can improve our specialization. And we have a lot of expectations at the forefront for that. Also, it's not just Sompo Japan, but as you all know, the FSA is having the expert panel and as a result of the expert panel discussion, the company and the industry as a whole is trying to change itself, and that has been our tailwind. Thank you.

[Interpreted] Thank you. Now as time has come, we would like to end part 1 regarding the Domestic P&C Business.

Thank you very much. We're very much looking forward to giving you the story of the overseas international business. We want to give you a better understanding not only where we've been but where the business is going in the future. We have a strong basis for the next 3 years, and as you can see, there are a number of topics that I would like to discuss today. On the next slide, I'm just going to remind, I think I've mentioned this in previous investor meetings, about the strategic objectives of the overseas business. Number one is to continue to improve the operating income driven by underwriting efforts. And so in the previous midterm plan, we had a top line growth, which reflected the desire and the opportunity in the marketplace at the time, but we are being focused on operating income. And it's a goal that is set not only for myself but through -- down through the organization to all aspects and all parties and all geographies. We're going to talk about how we're going to expand our business to attracting more customers and delivering more products. But we also focus on how do we drive the culture of the organization to drive a common objective and to deliver that to the organization not just through the commercial but also the consumer business that we have in Turkey and Southeast Asia. How are we going to do it? We're going to do it with people. We're going to make sure that we continue to invest, to attract and to retain the best talents in the marketplace and ensure that we have succession planning not just for the immediate future but for the coming 10 years. We'll continue to invest in technology in order to enable us to become more efficient, to make better underwriting decisions and to deliver better services to our customers. On the next slide, highlighting what we've become. If you think about the evolution at the acquisition of Endurance by Sompo in 2017, the business was driven by primarily a global reinsurance business, a U.S. specialties business and a London market wholesale business. The portfolio has grown fourfold to be $16 billion, and it's created a tremendous platform for us to continue to grow and to evolve this business and combined, as we look at Sompo Group, as one of the leading global P&C insurers in the industry. On Slide 5, I'm going to give you a little bit more details of the growth initiatives. And as we look at term, how do we continue to increase our profitability, we will not only continue to focus and drive our loss ratio and combined ratio in the right direction, but we're going to increase with more customers. And we're going to do this by expanding into new geographies and by offering new products. Some of the geographies are new for us, and some of it are in existing geographies. We were operating in different cities, which are in themselves micro markets in that space. And just some of the highlights that you can see here in terms of the United States, 23 staff onboard. We've opened offices -- we're opening offices in Denver, Houston and Miami, and we'll continue to look to expand to other geographical locations. Canada is a new operation that we're investing in and just awaiting regulatory approval. In Europe, we had already existed in Spain. We had existed in Italy, but we're expanding in Switzerland, Germany, France. We will look to continue to expand, as the market allows, into the other geographies. In London -- or in the U.K., pardon me, we've expanded into 2 new cities in the regions, Birmingham and Manchester. And so we're looking to capture more of that space. In Singapore, our strategy across Southeast Asia is to continue to not only grow the middle market commercial space but also to participate in the wholesale market that exists in Singapore. On the next slide, just a brief overview of some of the accomplishments that we've had, and you can reiterate what I've mentioned in terms of the aspiration, to continue to position Sompo to improve the brand recognition and to access different geographies in order to offer our existing and new products to new customers in -- across the globe. With that, I will turn it over to Mr. Burnet on Slide 7.

Thank you. Thank you, Jim. If we could go to the next slide. Sompo International Holdings is coming off a successful 3-year plan, where we were able to grow operating income by over $1.1 billion, the highest in Sompo International's history. We grew GWP to over $14 billion for our commercial business or 15% per year while improving our combined ratio to 91.8% if you exclude the onetime effect of our PYD, prior year development strengthening at year-end. We have 3 new financial targets focused on profitable growth and in clear support of the strategic objectives that Jim just outlined. We are committed to growing operating income by 10% per year to over $1.5 billion by 2026 even after funding our strategic global expansion, growing GWP to over $1 billion in the 4 markets that Jim just highlighted, while targeting an ROE of greater than 13% by 2026 to help the group achieve its target ROE. If we go to the next slide, we will achieve our financial targets by driving our strategic objectives, growing top line through geographic expansion while still maintaining growth in mature markets. We will maintain underwriting discipline through the planned cycle. And our modeled expectation is that we will be able to at least maintain our margin even in light of our growth strategy through the cycle. We will manage our investment income, which we expect to be beneficial through the cycle, not only benefiting from improved reinvestment rates but also from actively managing the portfolio. And finally, we will allocate and drive capital to the areas giving us the best risk-adjusted returns. If we move forward 2 slides, by all capital measurements, we have a strong capital base, which we manage through our newly formalized capital management policy. Our capital management policy, which is outlined on the right-hand side of the slide, is based on our economic capital solvency ratio or our regulatory ratio. Currently, at the end of 2023, shown on the left-hand side, we have an economic capital ratio of 214%. This is in excess of our target but consistent with our policy as we expect to redeploy the capital into our growth strategies. Finally, we have a stand-alone S&P capital ratio of 146% at Sompo International Holdings, which is a key contributor to the group's capital position. Although we hold capital based on an economic capital basis -- move to the next slide -- we deploy capital based on our internal model or economic solvency ratio. On the right-hand side, required economic solvency capital is based on our risk drivers, operational risk, credit risk, market risk, cat and non-cat risks. And as you would expect, cat and non-cat insurance risks make up the majority of our required capital. You can see our capital diversifies by line of business, geography and risk driver, which reduces our required capital, as shown on the right-hand side of the right-hand chart. On the left-hand side, you can see our economic solvency ratio has exceeded our target. And in most recent years, we saw an increase, which was driven by a model assumption update that now aligns us to the group's approach. On the next slide, we take this diversified economic solvency, and we attribute it to each line of business, and we manage our returns based on a return on risk adjusted capital while trying to optimize for our tail risk or our capital at risk, our earnings volatility, pricing adequacy and our risk appetite. On the chart, the Y-axis represents the return on risk-adjusted capital, and the X-axis represents the required capital or capital intensity of each line of business. We manage the overall portfolio to optimize for the areas of appetite, and we drive excess capital to the lines of business that exceed our hurdle rate. As you can see on the chart and as indicated by the star, that the portfolio as priced exceeds our return on risk adjusted capital target. If we move forward 2 slides, this slide shows our combined ratio walk from now to the end of our planned cycle 2026. The walk shows almost 6 points of combined ratio improvement over the planned cycle after adjusting for the onetime effect of prior year development at the end of 2023. We expect to modestly improve our accident year loss ratio even after growing our top line in new markets. We expect that the accident year loss ratio improvement to be in line with the impact of the investments we will make into our growth strategies, keeping the combined ratio relatively neutral through the cycle. On the next slide, at first glance, the mix seems relatively stable with the exception of property, casualty and agriculture. Most of the agricultural reduction has been impacted by commodity prices and tactical reunderwriting. Although property and casualty has gone up since 2022, this has been driven by the strong rate environment increases that we've seen. And we believe, over the last cycle, we have been able to reduce exposures and achieve better terms and conditions. And we will illustrate this on the next slide. You can see on the chart a representation of our cat probable maximum loss. Since 2019, we have grown our net written premium by over 16%. And over that same period of time, we were able to reduce our probable maximum loss to any 1 occurrence by 8%. This has been achieved through several actions, general portfolio diversification through our growth, disciplined limit deployment but most notably, deployment of limit in line with pricing adequacy. The other notable change to our cat portfolio has been reshaping, and we will illustrate that on the next slide. As you can see on the left-hand side of the slide that the additional reshaping actions have taken place. This has allowed us in the most recent years to have strong performance relative to our reinsurance peers. We have reduced exposure to attritional losses by driving the portfolio away from lower attaching cat losses to higher attaching cat losses. We benefit from improved pricing over the same period of time, and this is evidenced by our priced loss ratio. On the next slide, as a management team, we are committed to expense discipline. As you can see on the right-hand side, we maintain a good expense ratio relative to our peers even after the investments we have made into our geographic expansion. On the left-hand side, we have deconstructed our expense ratio. In 2024, we will grow our expense ratio by approximately 1%, this is driven by our geographic expansion and the knock-on effects of inflation. As these investments drive top line growth, we expect the ratio to revert back, benefiting from scale. These expenses will be funded by both underwriting improvements and increased investment income through the cycle. If we go 2 slides forward, as it relates to our investment portfolio, Sompo International Holdings has a high-quality, well-diversified investment portfolio. We have an average rating of AA-, an average duration of 3.7 years, and 75% of our portfolio is investment grade or better. We have a centralized team that manages our global portfolio. We maintain a hold-to-maturity strategy, which means we match investments to our liabilities for duration, currency and liquidity. This strategy makes us less susceptible to permanent capital impacts from interest rate movements. On the next slide, over 2023, investment income last year was up 90%. And we expect to benefit from increasing investment income through the next planned cycle, as shown on the left-hand side of the slide. This is driven by improved reinvestment rates, and given our duration, approximately 25% of our book matures annually. This coupled with top line growth is driving the investment income improvements. But it's not only rates that are driving our investment income improvements. And on the next hand slide, we show that we have taken management actions to improve investment income. Most notably, we have benefited from improved cash flows based on improved analytics and strong profitability. We have tactically reinvested to benefit from higher points on the yield curve. These 2 actions should account for about half of the investment income improvement as we expect and as forecasted in 2024. Jim, I'm going to turn it over to you.

If we could advance 2 slides, as you can see, a few messages that we'd like to leave you with, firstly, that the first quarter has started off well. We're off to a very good start. If you look at the top line growth, if you exclude AgriSompo, which, as Nick discussed was -- is influenced by commodity pricing, we're growing over 10%. The rate increases that we're seeing are still in line with our targets and for the various lines of businesses. The growth initiatives have taken root and are already contributing to our success. We remain focused on underwriting and driving down the loss ratio, which is helping us to fund much of the investment that we're making into the new territories. And we are committed to the group and the return that we make in terms of both the dividend and the return on equity. And so first quarter, our first quarter, which is January through March, was off to a very good start. Next slide. And finally, some key messages that we'd like to leave you with. As I just indicated, we're off to a good start. We continue to focus on underwriting. We're improving our cat exposures and cat risks, and the investment income is expected to drive part of the results over the next cycle we plan. We're continuing to invest in growth strategies and self-funding this by profitability of the overall portfolio. And we have a strong capital base in which to continue to grow and continue to pay a dividend to our shareholder, Sompo Holdings. Thank you.

[Interpreted] Now we would like to take any questions that you may have. Thank you, Mr. Shea and Mr. Burnet. Does anyone have a question? Mr. [ Sasaki ] from Nomura, please.

[Interpreted] This is [ Sasaki ] from Nomura Securities. I have 2 questions. My first question is about the other day, when you were speaking, you talked about risk appetite towards M&A, and you were saying that you don't have any big deals in your mind. Can you give me an update of your thoughts? And also, the other night -- yesterday night, there was press coverage about your company thinking about a major acquisition. So can you give us any updates on that as well? Secondly, regarding the premium cycle, I would like to hear your thoughts on that. For example, for D&O, cyber insurance, for those lines of businesses where rates have been increasing, there's been a lot of coverage talking about the softening of the market. So what is your perspective? Can you talk about how you view the premium cycle? And can you talk about any positives or negatives or neutral impact on your current plans?

Thank you. Thank you for the question. On your first question, I did read the same article that you are referencing. And I reiterate we don't make any comments. So, no comment. Secondly, in general, when we look at M&A, we do continue to look at opportunities in all markets across all sectors and evaluating the contribution and the benefit that they would make to the organization. And so we continue to do that as a natural normal course of business. I don't know if you want to -- anything to add on the M&A side?

No, nothing.

Your second question with respect to the pricing environment. So I agree with you, you are seeing some softening, but -- when we look at risk, we look at it in three categories. So number one, is it a good -- is the risk selection good? Is this a company that we want to ensure, whether it's by reputation, whether it's by industry, whether it's a variety of combinations. Number two, when we do apply terms and conditions, we want to make sure that those are correct. And so the limits that we're going to deploy, the policy wording that we're writing, the coverage that we're providing. Third, we look at price, and so as we've gone through the cycle, we have continuously enforced risk selection. We've continuously improved the terms and conditions as Mr. [indiscernible] mentioned. And if we do see pricing declining from last year, we still feel that it's a good -- it's a risk worth taking. The terms and conditions are acceptable, and the rate is still above what we deem to be an acceptable rate. And so I believe the challenge of managing in a hardening market and when to push rates in terms and conditions, the skill set, good underwriters will know when to manage through a down cycle and reduce rate. But at what point do you exit from a certain risk because both rate, the terms and conditions and risk selection becomes outside of appetite. So I feel that despite in certain lines, you hear of rate reductions, we still feel that the rate is sufficient, and that the portfolio and the risk selection was good.

I have a follow-up question. For the capital position, when you were talking about the capital position, you were talking on a regulatory basis as well as on an ESR basis, it exceeded the maximum. So when you look at the presentation, during the current medium-term plan, risk continue to exceed your target. So why are you managing your capital in this regard? So for the excess, are you going to return it back to the holdings company or deploy it to certain areas. So why are you managing capital in this regard?

So part of what we will do is redeploy it as we talked about. But as we go into new markets, capital isn't always as efficient. So we have to think about it in the context of each of the stacked entities that we're going into. So as we grow in Continental Europe, into Canada and as we go into other markets, it is being deployed, but we all have to think in the context of liquidity, rating agency and all the different capital position. So from that perspective, we need to have a little more cushion through the growth cycle as we go through that growth cycle.

If I may follow up on the previous point. This is Hamada for ECR -- ESR.

We have been exceeding since 2022 back then for the ESR solvency ratio. From Tokyo back then to SI, we have been doing a capital raise of JPY 200 billion and to benefit from the high rates in the U.S. So that is still in place. And this means various things. One is there is still a gap in the rate environment between U.S. and Japan. There's also issues around IFRS as well as FX risk. But overall, basically, it's better to deploy your capital overseas than in Japan. So that is why the excess capital position lies in the international business. Also for ROE, for Sompo International, it's currently up 13%, but actually, they can do even better capability-wise. But as a group, we have our capital deployed there. And that is why ROE for SI is at 13%. So I hope you understand. If that's the case, simply put, are you seeking opportunities? That's how it comes across to me. Of course, that is one possibility. We do manage capital at Holdings, but Sompo Holdings until we deploy the capital, we are not able to manage the capital. So -- that is why we place our capital in the market where we can manage the capital.

Thank you very much, Mr. Sasaki. We received some -- well, we have some questions from the remote participants. So let us get connected from Mizuho, we have Mr. Sakamaki.

Yes. This is Sakamaki from Mizuho Securities. I hope you can hear me. One question I have -- in your presentation, on Page 31, I'm looking at Page 31, so this talks about the overview of commercial insurance mix in the casualty part is becoming bigger. And in your presentation, cat risk and property risk management is the area that you explained about, and what about the casualty in the industry, if you look at that, a reinsurance, for example, companies, U.S. companies are becoming more prudent in underwriting. So the casualty risk and social inflation to respond to that. What kind of risk management are you planning to do? Could you give us some update?

Thank you for the question. In terms of the casualty book, the casualty business is made up of different lines of businesses. So you can have workers' comp, general liability, you can have other areas. And so what we've seen is in the United States, in particular, that the rate and the terms and conditions have been, we deemed to be an attractive rate. We're seeing -- we follow the social inflation very carefully. And much of what Mr. [indiscernible] talked about of the PYD in terms of last year was to address that. And so we feel that the rate environment is still good. And so in selective, less of the high global risk companies that we feel that there is still an opportunity to continue to grow in that space. However, much of the rebalancing, as I've mentioned in the past, the reinsurance business has to been move away from property in the U.S. into casualty in Europe and outside of the United States, and that would be reflected in these numbers as well.

Yes. And I think we still think that the price adequacy of those lines of business are strong. We think that the terms and conditions have been beneficial through the last cycle, and we'll continue to monitor and risk select as we go forward through the cycle.

Thank you, Sakamaki-san. Well, for this session as well, we have received some questions in events. So I will read out the questions. First question, is about geographical expansion. For the Western markets, competition is quite intense. So for SI, what do you think your strengths are in order to win in these markets? Over to you.

Thank you for the question. I think that the establishment of what Sompo has achieved in both the North American, U.K. market over the past number of years and in the global reinsurance market has developed strong relationships with our intermediaries, and that represents over 95% of our business. And so when we enter these new markets, we enter it with strong relationships with those distribution partners, and we feel that the people have been key to our success in this marketplace. And so despite some of the changes in technology, this is still very much a people and relationship-driven business, and we have focused on hiring the people with that experience and those relationships in each market. And so companies will make money through the cycle. It's more challenging in a down cycle, but we don't have the legacy in many of those markets. And so we feel with the right people, with the right strategies, we will be able to make money by entering those markets and further diversify our portfolio across the segments.

We have another question that we received beforehand about the overseas insurance business, looking at the new medium-term management plan, the -- in comparison to the high growth in the past, the numbers, the forecast seem a little more conservative. And as for the forecast, are there any upsides that you can talk about? Or if there are any downside or potential downside risks, what would be the downside risks that you consider? And how do you plan to manage those risks? So that's the question that we received.

[indiscernible] I would say having completed 1 quarter of a 3-year plan, I wouldn't be sitting here talking about what the upsides or the downsides are. We will continue to be flexible. I think you need to look at the impact of cat losses. And so I have no control over that. I've explained how we've improved the portfolio and the resilience of that portfolio. But projections are for a very active cat season this year. So we'll see how that transpires. But at this point, I wouldn't have any, any indication of up or down or deviations from that. Anything to add?

No, I think we'll continue to monitor interest rates, I think, depending on what the central bank actions are. But again, it's too early to determine in 1 quarter, a 3-year plan, where those actions will go.

Does anyone else have a question? If not we would like to conclude this session. Mr. [indiscernible] thank you very much today.

Hello. My name is Watanebe. So I would like to talk about the well-being business, but this is the first time I'm presenting. So you might have a question around what is well-being, what are you trying to accomplish? So I would like to walk you through. And also, the core part of our business is the domestic insurance business and the nursing care business. So, I will talk about these businesses in detail and also I'd like to also talk about some recent trends in the business. So I'd like to go straight into the presentation to the first page. So what we would like to achieve through the well-being business is stated here. So we're in an aging society and the people who are receiving care has been increasing substantially. And also business caregivers. It's not just the care receivers, but the people who are caregivers have been increasing in number as well. So nursing care is going to become a huge social problem and challenge. So we are aware of that. So we raised here three concerns that we want to solve. The first one is -- we're an aging society and life expectancy being longer is great. However, there's about a 10-year gap between your life expectancy and your healthy life expectancy. So we will have 10 years in your life where you are not healthy. So that's the health concern. So secondly, business caregivers as well as family members used to resolve these issues. However, because of low birth rates, declining population and aging society, families solving their problems personally, is becoming increasingly difficult. And also, when you look at nursing care facilities, the job to offer ratio has become tighter. Therefore, we are not able to have sufficient numbers of caregivers that are professional. Therefore, when you have a longer life, you start to face financial concerns. When we were talking about longer life risk, we were looking at how much assets you have, but you also need to think about sickness as well as nursing care, so the demand for finances is going to become stronger. Therefore, in the well-being business, we would like to solve these three concerns. By doing so, we want people to feel in society that aging is a positive thing. So that's the direction that we are heading towards. Turning the page. So up until now, when you wanted to deliver services in this regard at the Sompo Group, we have the domestic life business as well as the nursing care business that has -- are better capable of addressing these challenging. And we also have a B2B to the corporate wellness business, which were businesses that support our employees. And the size was considerable in delivering our services. So each of these businesses were independent from one another in the past. But we are trying to connect these businesses together and provide seamless services through Sompo well-being. This is what we are attempting to do through this new organization. By doing so, we will be able to connect customers and households and deliver connected services for unique and sustainable growth. By doing so, we would like to for a long time, connect with customers in a greater way. So this is the concept we have. And once we're able to achieve this, if you turn the page, we will be able to offer lifetime solutions to our customers. And when we're able to do so, we won't have to limit ourselves to the current business, but also acquire or through alliances offer new businesses so that we can offer more value to the customer, and contribute more to the well-being of our customers. So that's the concept between -- behind the well-being business. Turning the page. So -- what are we attempting to do internally in detail that goes to the diagram on Page 46 that talked about resolving the three concerns. We want to establish a society where people perceive aging in a positive manner. And on top of insurance and nursing care, which are our core businesses, we would like to add on new businesses as well. And for the respective businesses, each of the CEOs will walk you through hereafter. But we would like to ensure that we brush up the strengths of our core businesses leverage them and also add on new businesses. So for insurance and nursing care, we will set targets, respectively, and make these businesses stronger independently as well. And as you can see under number 4, for mental health for the corporate wellness business, this time around, we made investments into a company called RIZAP. So for those aspects we don't have, we would like to acquire the missing pieces. So that towards the goal of wellness, we could fulfill the concept of wellness better by acquiring these businesses. However, we won't be able to offer good customer experience by offering these businesses independently. So on top of the online services, we have, we would like to have the off-line physical branches or offer services through our agents. And through the accumulated data, we would like to leverage that data through analysis in each of our businesses. And for example, we will be able to project how much care a person needs or for that person's assets. With that health condition, we will be able to anticipate how much of assets or finances they will need, and provide that information to customers and that will not be the end of the relationship. In order to avert certain events, we would like to make our clients even healthier and we'll be able to make suggestions around how they can reduce the amount of money they need in order to stay healthy. So those are the things we would like to do through our business. So one core business is the domestic life business; and Mr. Oba, our CEO, will walk you through.

I'd like to talk about the domestic life business. I am Oba, I'm the CEO of the Domestic Life Insurance business. So please turn to Page 48. So human life is -- has been going through unique growth in the past. In fiscal 2016, we changed our vision to a health support company. And from fiscal 2018, we came up with products and services that put this into practice called Insurhealth. So this is life insurance and health considered together, we offer a solution that combines the two aspects together. So we offer insurance through life insurance and health care in order to support your health. So Insurhealth is a combination of the two words. So centering around Insurhealth, we have developed our business. So as you can see here, the number of in-force policies as well as the annualized premium in-force, we have been able to go through growth that exceeds the industry's average. And on an adjusted profit basis as well as capital efficiency basis, we have been able to go through high growth. Turning the page, which is Page 49. So growth drivers. The growth driver was Insurhealth, and we show some details here. At this point in time, cumulative sales has reached JPY 1.6 million or JPY 116 billion on an annualized premium basis. So literally, Insurhealth has been a driver of Himawari Life. And last year, in May, the 10th product under Insurhealth was introduced, which was a variable insurance product. And it proved to be successful. It turned out to be a product that grows by JPY 10 billion per annum. So it's health promotion, life insurance and various insurance companies have been launching these types of products. But from our understanding, annually, 1 million of policies are sold by only three companies, and Himawari Life is one out of those three companies. And as you can see here, for the Insurhealth type products, it's protection products, mainly and it's designed to generate high profitability. And this has been the core of our sales. Therefore, we have been able to boost the profitability of the entire company. And in 2018, there is a product -- we launched it in 2018, 6 years of past. So we have been able to accumulate data, and we have been able to see some effects from this. First, health challenge, Get Healthy challenge. For example, stop smoking or BMI improvement customers. We give cash back to those customers who were able to improve their health status. And when you compare the hospitalization rates of customers who succeeded they are 50% less likely to become hospitalized. And after 3 years since they renewed their policy, 4.5% more customers have renewed and the ratio of appreciation for Insurhealth is at this level as well at 50%. So regarding our future plan, which is on Page 50, we will continue to focus on Insurhealth and we would like to increase Himawari Life clients and users of the service, who are connected with us through our products. So by increasing the number of the so-called fans, we would like to enhance our profitability. And for nonfinancial targets, which is the bottom, I talked about our volume targets first. But for the nonfinancial targets, which is more about quality, regarding activity around their health or number of health actions. For customers who went through a behavioral change or started to exercise and so forth. That's what we call health actions. And we raised the target. But in fiscal '23, it was 60,000 and we would like to increase this to 550,000. So it's not only increasing the number of policies, but we would like to promote behavioral change amongst our clients and offer opportunities for customers to do so. so that we could drive Insurhealth even more. So that is what we are striving to do in the next 3 years. So next page. So for the well-being business, Insurhealth was being focused by Himawari Life on a standalone basis up until now. But now we are part of the well-being team. So we would like to connect with the other businesses so that Insurhealth or health and life insurance can play a role in offering solutions to resolve the three concerns. Turning to Page 52. This shows the factors of variation adjusted IFRS profit and ROE, which is for your information. That is all for me. Thank you.

Thank you. Next is Mr. Washimi.

I am CEO of Nursing Care business. My name is Washimi. I'd like to talk about the Nursing Care business. Going to the next page. First of all, I would like to talk about the businesses -- the range of the businesses. We have Sompo Care, which -- and also the ND Software, those are the two major companies. So the basis of other businesses or two companies are shown on this slide. Next is about the environment and the summary of the previous medium-term management plan. First of all, about the environment. I think you all know that the start of the public long-term care insurance system was in the year 2000. And in 2040, the elderly people above 75 years of older will be 2.5x more and working age population is expected to come down by 30%. And one of the major challenges is the gap. That is to say that the working age population will be in shortage. So in the previous MTMP, we talked about how we plan to fill the gap, by improving the compensation and the development of egaku or future nursing care and also acquisition of the ND Software. And in this MTMP, we try to improve the productivity with high quality, and we would like to work on the operator business to offer the future nursing care and also to realize the connection with the customers and deliver the connected services. And we'd like to do so by using egaku and ND software in the platform business and well-being business. This page talks about the details of the operator business. The strategy here, there are three strategies. The first, starting from the left is the improvement of the profitability, growing the existing business is a given. And until last fiscal year, we have done the M&A of our four companies. So we would enhance the PMI. And in coming 3 years, we work on the improvement of the profitability of the new areas. And the second strategy is to build the business model, which is sustainable. So improving the productivity with the high quality, want to make sure that we can build the future care services and to support the -- to provide the nonpublic insurance revenue, providing a more fulfilling lives for those people. And the third strategy is to adopt to the external changes of the environment. The utility cost and the repair cost and others, costs are increasing due to the inflation. And based on that, we would revise our prices. So using the resources that we can gain through those strategies, we would like to make an investment to the human resources who are engaged in giving care. Next page. One of the biggest challenges that we are faced with is to build the future nursing care. Let me talk about that. The future nursing care, for that, we need to have an improvement of productivity with high quality in the phased manner. That is to say that the way of providing care. There are some issues and other challenges. And it is clear that we will face the gap between the supply and demand. So Sompo Care, the conventional care work, we want to change that to the new care giving, which is not always considered to be the negative or the hardship. And as a result of it, this is the Sompo [indiscernible] model. This is the size of about 50 people. And the per facility, we have 18.3 people working. And in 2030, we would like to have 14 people per facility, so down by 4.3 people. And through those people, we would like to create the model, which is available for 24 hours a day. And for [indiscernible], the 20.3 people will support the one facility. Currently, it's 26.2 people, but we would like to reduce that to 20.3 people per facility, so down by 5.9 people. So even when we are faced with the shortage of the human resources, we would like to create this sustainable model that we can continue to operate. On the final page, we are talking about the platform and the well-being business connect with the customers and deliver connected services. The DX and technology and data need to be utilized and so that the caregivers can focus on the work that can be done only by the human beings. And the care at home, we would like to use the digital technology and also provide private services so that in both at home and at facilities, we'd like to hone our care services, and the know-how that we have built in the Sompo Care, we would like to provide those services in care giving facilities. So 48,000 facilities that are using the ND system and also the 60,000 or more facilities are using this system. And Sompo Care together -- working together with the caregivers and other facilities, we would like to get connected. And connect the Sompo Wellbeing so that the elderlies and families, we can swap the three concerns of those people. And so Sompo Care would like to be the anchor of the Sompo Wellbeing, which is staying at your side at all time. Now about the future initiatives, let me move on to the next slide. So already, I talked about some of the initiatives. First of all, about connection with the customers and delivering connected services. This is one of the cores of the well-being business. Each business have made the presentation, and we are improving those businesses. And in a group until now, we provided those individual services, and we want to connect them and collaborate. And from the customer's perspective, in addition to the care receivers, we want to get connected with the families of those people and utilize the data. And by doing so, we want to expand the services. And as you can see on the right-hand side, the -- through the improvements of each business, we can provide the solutions, and we can connect the customers' experiences off-line and online. By providing those online and offline, the end users and their families can come in touch with the Sompo Group in the longer term and in the richer sense so that we can increase the number of the customers. And through that, we want to add the new businesses through the M&As and the new alliances. And we want to create this cycle and go through this cycle so that we can expand the LTV in a sustainable manner. So that is our concept in the well-being business. Recently, in June, we made announcement about the chocoZAP investment or the partnership with RIZAP. So how is the connection with the customer changing with that, I'd like to use the following two slides to explain Page 61. This is one specific example. In our group, the biggest customer base is 20 million policyholders of Sompo Japan. So Sompo Park provide the helpful services as Sompo Park's website. So via this Sompo Park, we can refer Sompo general policyholders to get chocoZAP services. So providing the chocoZAP services to the policyholders. And by doing so, our customers will be more interested in the healthy activities. And through that, Insurhealth, can be provided. And that is the one idea. And the second idea in Sompo Group, we have Insurhealth directly connected customers, 1.6 million of them and grow base is a wealth communication is the medical checkup and others. The customer base is 1.5 million and chocoZAP 1.2 million. So right now, they exist independently, but we can share the interface so that we can refer customers to each other. And by doing so, we can have a stronger touch points with the customers. So for example, once the year or when the incident happens in the nursing care, those people who are closely engaged is only a limited part of the customers. But through those various services, we can have the more touch points. And by doing so, number of the customers and also the frequency of the visits can be increased. And using the digital technology is something that we are thinking of. And the following page -- this is the -- how to extend the healthy life expectancy by connecting those different services, we think that we can do so. So MY Himawari customers and we can encourage them to go through the brain checkup and other medical checkups and also MRI and the CT scan service of the chocoZAP can be also applied. And we can upload the data into Himawari. And based on the data, we can give instructions about the exercises and how they can prevent the diseases. So we have a SSAP and health support services to provide support in the exercising, and also chocoZAP has trainers who can actually provide physical support. So after the introduction of the exercise, it was just encouraging people to exercise or -- but now, you can say based on the data that you went to chocoZAP 3x last week. So we can be more specific in giving proposals. So the whole flow can be done within the group. And by repeating this, we can see the improvements in the next medical checkup. And we should be able to do so looking at the data, and that will lead to the extension of the healthy life expectancy that we think we can provide to our customers. So that is connecting with the customers and delivering connected services, something that we were unable to do individually, can be done through this alignment and collaboration. Next page talks about the real touch point that we will be also providing. So to respond to the three concerns, health, nursing care and the financial concern, we would like to provide the support center, which will provide the consulting. And just online will not be able to provide a sufficient support. So we would like to also establish the support center. So we think that we plan to have three centers per year or within 2024, and B2B2E, the E customers, that is the employees of the company's corporate wellness service, including the HR people, we would like to provide proposals to solve those three concerns that I talked about. And through those activities, we would like to provide the new services and grow those services. And this is the new service so we need to experiment and there may be some failures. So we want to be able to do this agilely and so that we can establish those services. And with that, I'd like to end my presentation about the wellbeing business, and thank you for your attention.

Mr. Watanebe,. Mr. Oba, Mr. Washimi, thank you very much. Now we would like to take any questions that you may have. We have a person in the room, Mr. Sasaki from Nomura.

My name is Sasaki from Nomura. I have three brief questions. On Page 5, I'd like to confirm some numbers on this slide. Earlier, you were talking about the health challenge hospitalization went down by 50%. For those who succeeded in the Get Healthy challenge. So about 20,000 people were those people who were subject to this that their hospitalization went down by 50%. And in Himawari Life, compared to the number of benefits that are paid out. Is this -- how much of an impact is this? Is it by 10% or 20% or otherwise? And incidentally, the hospitalization went down by 50%. And does the premiums for that given person also decrease then after. So that's my first question. My second question is for the nursing care business, before at the business meeting, when I heard your presentation, apart from nursing care insurance, you would like to diversify your income sources was what you mentioned. So if you benchmark against the current top line of the nursing care business, how much of additional income were you able to generate, if you benchmark against the current level at 100. Number three is about RIZAP and your alliance with them. So you're offering places to work out, and I think that's meaningful. But why did you need to spend several billions of yen to hold RIZAP shares? So what's the significance behind this? And on Page 62 for the checkups and brain health checkups, by accumulating the data, you're going to try to trigger a behavioral change. But who's going to shoulder this procedure, which is quite cumbersome.

So for the first question, Mr. Oba will take it. And number two will be taken by Mr. Washimi. And number three will be taken by Mr. [indiscernible]. Mr. Oba, please.

So for Page 50, thank you for your question, Mr. Sasaki. For Get Healthy Challenge, 20,000 people -- there were people who joined the challenge that was 20,000 people. And out of the 20,000 people, they need to stop smoking and for their blood pressure, it needs to be within a certain level that we set as well as BMI. When you're able to achieve these three targets, that means you've succeeded the Get Healthy challenge. And we -- your premiums can be caught by 30% in retrospect and your future premiums can also be decreased by 30% at maximum. Same thing for the test. So the 30% will be cashed back and your future premiums will be discounting. So the 20,000 people joined the challenge, and they were about 13,000 people who succeeded the challenge. So the probability of succeeding is about 60% to 70%. You need to clear the targets or else you won't be able to get the cash back. So it was 70% of the people who joined the challenge who succeeded and was able to benefit from the Insurhealth program. And out of the total claims paid were the benefits paid, it was only several percentage points. So we pay about 300,000 or that many number of benefits, therefore, so this challenge doesn't account for a great amount. However, for those who succeed this challenge, I mentioned that the probability of success is about 70%, 7-0. So the number of policies increased and the more people -- if we see more people succeed by fiscal '26, the amount of payments we make, meaning because our customers are healthier, the insurance benefits will be decreased. And we are expecting that the cuts will be about JPY 300 million by fiscal '26. And of course, when we see more Insurhealth customers, the benefit -- reduction impact should be greater, but that hasn't been accounted for in the business plan. So it's an upside factor. Because we are not targeting how much of a reduction in benefits we're able to make, but that is an impact we can expect, which is not accounted for in our business plan. But we would like to -- we are striving to expand the Insurhealth business by be mindful of these KPIs as well. That's all for me.

So for the second question, I'd like to take it. So first, compared to our top line. So nursing care income is a little bit over 50%. 30 to 35 is real estate income because we own property. And for food, we make -- prepare the meals, so food-related revenue is a little bit over 10%. Remaining revenue is about 2% or 3%. Noninsurance private services are included there, and we offer consultation services in selling food and so forth, which is included in the 3%. And when it comes to earnings, because we made advanced investments or initial investments, as of fiscal '23, we were, at that point, not profitable.

So I would like to take the third question regarding RIZAP and the significance behind the capital alliance as well as the brain health checkup cost. For the capital alliance and its significance in short, what we want to accomplish with RIZAP, we basically want to accelerate our efforts, and this requires capital is what we thought. And that is why we injected capital into this alliance. And we have things we want to accomplish over the short term as well as the medium term by leveraging Sompo Park, we would like to cater to our customers. And also in the life insurance business, through MY Himawari, we would like to refer them to chocoZAP. So that's a short-term goal. And also for the nursing care business to their families as well as to the workers, we would like to offer chocoZAP services and also for corporate wellness for employees of companies, we would like to refer them to chocoZAP. So that's over the short term, and we would like to boost the bottom line. But over the medium term, the data we are able to accumulate over these initiatives, meaning that health checkup as well as the exercise data, what is the intermediary KPI? By looking at the data, we would like to develop new products and services. That's what we have on our mind. So we would like to create a data platform. And to accelerate efforts, we would like to have RIZAP expand their customer base. And that is why we deemed that we needed to engage not only business alliance, but also a capital alliance. If I may follow up on that. It's a matter of who owns the data. And when you think about that, we want the data to be contained within the group. And directionally, we are able to give more instruction and guidance by engaging in this capital alliance. And regarding your second question, for the brain checkup for the chocoZAP customers right now, the cost is included in their membership. So once a year, they are able to go through the checkups for free. So chocoZAP is shouldering the cost. And for us, to our policyholders, we would like to recommend the health checkups going forward increasingly. And as mentioned in the life insurance part we would like to use the points raised in order to change the behavior of the customers, have them go through health checkups and accumulate data around it. So that's another initiative we would like to engage in. So in that case, the life insurance business is going to be shouldering the cost. That's all for me.

I see -- so if I'm wrong, please let me know. The main number system will be linked to the health data. I think that the law has already passed. So without -- instead of waiting for that, use of the RIZAP up data is better to start those changes. Well, the results of the medical checkup is one thing. But before that, as a medium-term level, what kind of activities were done on what load or burden and how frequently do the people exercise. So that is the data that you'd like to collect. So going to the gym, we need to collect data in order to do so. And I think that this type of data is valuable.

Mr. Sasaki, thank you very much for your questions. So I'd like to continue with the Q&A. If you have any questions, please let us know. There is a hand among the remote participants. So from SMBC Nikko, we have Mr. Muraki san.

Muraki From SMBC Nikko. I have a question about the Himawari Life. So Insurhealth the number of the policies in force. And the those people who are under the conversation and actual -- actually, the 20,000 people participated in the health challenge. In order to increase that number, what are the obstacles or what are the issues? And the chocoZAP has 1.2 million members. So through the partnership with RIZAP, the number of the health challenge. Is it possible to increase it? And how possible is it? And also MY Himawari-- in the medium-term management plan, 450,000, I think, is the target. So out of them, in terms of maybe some of them are logging in because of the contract, but how many of them are expected to use the health app. I think that you'll be introducing this in September. So how many do you think will be using the app using or via MY Himawari?

Thank you, Mr. Muraki for your questions. First of all, the health challenge -- Get Healthy challenge, more than 60,000 is the Insurhealth customers and the contract with the compensation guarantee is about 370,000 out of 1.6 million. So out of the 370,000 people who participated in the Get Healthy challenge is 20,000. You mentioned that it's small. And that's right. The number of the people who participate in Get Healthy challenge, we want to have a deeper engagement, and we want to, of course, increase the number of the people who participate. There are various reasons why we are not seeing a lot of people participating. There are opportunities, but some customers don't want to stop smoking right now? Or in terms of BMI. In order to participate in this challenge, BMI is not likely to improve. So the awareness about the health among our customers. As we try this, there is so much differences and the level of awareness and level of interest are quite different. So this is a great function of the Insurhealth, and they are already part of this. So we would like -- through the communication and how can we provide the information and how we can provide such information so that the healthy challenge will be utilized more. So we are always trying to find a way. And one of the ways, as you asked your question is the use of chocoZAP. chocoZAP in order to become healthier, this is the actual service that they provide. And we did not have such service until now. So chocoZAP service can help to improve the BMI of our customers. So that is one of the reasons why we wanted to have a capital partnership. So we want to enrich this type of actual services that we can provide so that we can support the people to participate more in Get Healthy challenge. Now specific things, for example, chocoZAP or other service improvements and what is the expected upside of the participants of the Get Healthy challenge, we do not have a specific number. And we'd like to -- as I said, we'd like to consider how to communicate and others. And I think about that as well. As for the MY Himawari -- and health app, this is starting or we plan to launch this in September this year. So Insurhealth is a kind of an abstract and it's a package with the insurance and some customers have difficulty understanding. So using that app on your smartphone, your insurance status and health status can be seen with your smartphone. So that's the keyword that we'll be launching with MY Himawari. So in terms of Get Healthy challenge, those -- if you are successful in this, the future premium will come down by maximum of 30%. So if you are successful in this challenge, next month, how much can you save in terms of premium. And that is something that you can see in My Himawari app. So that's one of the functions that we're preparing to provide. So to increase the number of participants, I think this would be very effective. By showing it specifically. So for example, the future premium will be coming down by JPY 3,000 per month. So if that is the case, maybe you can work -- you can do more exercises so that you can reduce the BMI, and that is something that we can provide using the MY Himawari. And I think these two can be utilized so that you can -- we can have more people participating in the Get Healthy challenge. And relationship with the health app, about that point in your question, maybe I'm not answering your question. But in MY Himawari, when you register to MY Himawari for fiscal '26, we'd like to increase that up to 450,000. And in FY '26, the insurance customer and health exercises combined, we want to achieve 7 million. And of course, that we would like many people to register to MY Himawari, so they can actually see that in their smartphones and to -- we'd like to see 450,000 people registering to MY Himawari. So when we say 450,000 people, just downloading and use of the MY Himawari rather than that -- it will be possible to offer the health checkup and using an app -- those people who go through the light exercises will be also included. So those people who go through that checkup and also doing the exercise. So in addition to the registration to the app, also those people who register the medical checkup data or going through the exercises, those people who get connected with us in the very rich way, we will amount to 450,000. And that is our target. I'm not sure whether I'm answering your question. Another thing I'd like to mention is that this time in the medium-term management plan, what would happen to the well-being as a whole rather than that each business has come up with the presentations. In considering connection with the customers and delivering connected services to what extent do we expect the increase from 450,000? And what would be the synergy that we can see with chocoZAP. We are hoping to update that as we provide those services. So is the connect with customers and deliver connected services. Is this something that we can actually realize or not. That is something that we would like to consider. And right now, each business is talking about the possibility of growing its own business. And we are not including the upside as a whole.

Thank you, Mr. Muraki. There is a person who has raised their hands online. So we will take that question. Mr. Sakamaki from Mizuho Securities.

This is Sakamaki from Mizuho Securities. I have one question. Regarding investing into your businesses, I would like you to comment on it. So we were talking about chocoZAP, and you were talking about adding more services through the alliance. So for the well-being business in the future, what kind of additional services do you think you are lacking aside from the alliance with chocoZAP.

I will take that question. So we talked about the three concerns earlier. So areas that we would like to invest in regarding concerns around retirement money is something we would like to delve into. And regarding connecting with customers, customer platform as well as outlets. What are we going to do with that is something we would like to think about. Are we going to grow organically? Or are we going to make investments. Those are the things that we would like to flesh out and share with you accordingly when it's decided. So it's the platform as well as the contents and services, which are the areas that we would like to invest into, engage in alliances with those entities who have a customer base. So I think you can think about it in many aspects. So I hope that answers your question.

Regarding the way you use your capital, there might be just a business alliance in some cases or you might invest in a bigger way by acquiring the entire business.

Right. That's correct.

If not, we'd like to end today's session. If you have any additional questions, please contact IR office. Thank you very much for your attendance today. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]