Tokio Marine Presents
Special IR Meeting in London
July 1, 2024
TMK CEO | TMHCC CEO | Co-Head of Int'l | Co-Head of Int'l | CEO/CCO | CFO | DFG CEO | PHLY CEO |
Matthew Shaw | Susan Rivera | Brad Irick | Kit Yamamoto | Satoru Komiya | Kenji Okada | Don Sherman | John Glomb |
Table of Contents | ||
I. Strategy of | ||
International | P. | 3 |
M&A | P. | 7 |
PHLY | P. 12 | |
DFG | P. 13 | |
TMHCC | P. 16 | |
TMK | P. 17 |
II. Reference | P. 18 | ||
◆Abbreviations used in this material | |||
TMHD | : Tokio Marine Holdings | PHLY | : Philadelphia |
TMNF | : Tokio Marine & Nichido Fire Insurance | DFG | : Delphi |
NF | : Nisshin Fire & Marine Insurance | TMHCC | : Tokio Marine HCC |
TMNL | : Tokio Marine & Nichido Life Insurance | TMK | : Tokio Marine Kiln |
◆ "Normalized basis" in the material generally refers to the where natural catastrophes are adjusted to average level | ||
(other adjustments will be stated in the text) | 2 | |
Copyright (c) 2024 Tokio Marine Holdings, Inc. |
I. Strategy of | International | M&A | PHLY | DFG | TMHCC | TMK |
Profit Target for International Business
- International business profit growth target is CAGR of +7% or more (excl. past reserves takedown) under the Mid-Term Plan (MTP)
- Realize growth driven by strong underwriting while factoring in a certain level of softening
International Business Unit Profit*1 | (billions of JPY) | ||
CAGR +7% or more | International | ||
(excl. past reserves takedown)*2 | +7% or more | ||
Business Unit Profit | |||
(excl. past reserves takedown) | |||
448.9*2 | Underwriting | Approx. +7% | |
*North American underwriting | *Approx. +10% | ||
Includes a rebound in life insurance | Investment | Approx. +8% | |
which posted a loss in 2023 | |||
*Investment income | *Approx. +8% |
Developed | Emerging |
market | market |
Top-line*1 | 3,079.5 | CAGR approx. +5% | ||
C/R*3 | 92.3% | 91.8% | 91.8% | 92% range |
(2023 | ||||
→91.5% | →94.1% | |||
→2026) | ||||
Underwriting | Approx. +8% | Approx. -1% | Approx. +7% | |
profit (CAGR) | ||||
Profit will shrink compared to 2023 when Brazil performed very strongly. We plan to secure high levels of revenue by maintaining C/R at low to mid-90%
*1: FX as of Mar. 31, 2024. Business Unit Profit for 2023 is on a normalized basis excluding the impact of past reserves takedown | |
*2: 2023 result is JPY478.2bn (FX as of Mar. 31, 2024) including past reserves takedown. CAGR of the 2026 plan based on this result is +5% or more (2026 plan does not factor in change in past reserves) | |
*3: Figures include estimates. | 3 |
Copyright (c) 2024 Tokio Marine Holdings, Inc. | |
I. Strategy of | International | M&A | PHLY | DFG | TMHCC | TMK |
Top-class Underwriting Growth (Comparison with North American Peers)
- North American underwriting profit is expected to grow at CAGR +10%, representing top tier growth vs. peers
Underwriting profit
北North⽶PeersAmerican peers当*1 社■ 北TMHD⽶事業North American business*2
CAGR approx. +10%
CAGR approx. +8%
No | |||||||
Peer's data | |||||||
2023 | 2024 | 2025 | 2026 | ||||
*1: Peers: AIG, Chubb, Travelers, W. R. Berkley (Source: D&P) *Estimates by normalizing the impact of past reserves and Nat Cats to an average year level | 4 | ||||||
Copyright (c) 2024 Tokio Marine Holdings, Inc. | *2: Normalized basis (excl. the impact of past reserves takedown for 2023) | ||||||
I. Strategy of | International | M&A | PHLY | DFG | TMHCC | TMK |
Rate Increases
- Achieve growth while maintaining C/R at low levels, leveraging the competitive advantage built through strategic focus on niche markets and specialty insurance*1 and carrying out rate increases exceeding forward- looking loss cost projections
- Market hardening is expected to continue throughout 2024, and achieve steady profit growth through risk selection and a strong bottom-line focus to contain the impact of the market cycle
Rate Increase | C/R |
(% represent YoY rate increase) | |
(Indexation based on 2017) | +5% | 105% | |||||||||||
TMHCC *2 | U.S. P&C market average*5 | ||||||||||||
PHLY | +6% | +9% | |||||||||||
Market *3 | 100% | ||||||||||||
マーケット | +14% | ||||||||||||
+9% | |||||||||||||
+16% | +6% | 95% | PHLY*4 | ||||||||||
+11% | |||||||||||||
+9% | +11% | +8% | +6% | ||||||||||
90% | |||||||||||||
+5% | +7% | ■ [Ref.] North America U/W profit (USD mn) | |||||||||||
+9% | 1,500 | ||||||||||||
+3% | |||||||||||||
1,000 | TMHCC*4 | ||||||||||||
+4% | 85% | ||||||||||||
+2% | |||||||||||||
500 | |||||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 0 | 80% | ||||||
2023 | 2017 | 2018 | 2019*4 | 2020 | 2021 | 2022 | 2023 |
Due to Covid-19
Due to past reserve provision
Copyright (c) 2024 Tokio Marine Holdings, Inc.
*1: See P.12 and 16 for details
*2: Excl. A&H・Surety・Credit *3: (Source)Willis Towers Watson
*4: | Local management accounting basis. Temporary increase in PHLY due to increase in past reserve provision | 5 |
*5: | (Source)S&P Capital IQ |
I. Strategy of | International | M&A | PHLY | DFG | TMHCC | TMK |
(Ref.) External Evaluation of Our North American GCs
- Scored the highest favorability rating in the Americas*
*: A survey for risk managers in large companies with 250 or more employees by FT Commercial Insurance GIST 2024 Survey (Nov. 2023-Feb. 2024) (Source) P&C Specialist: Big Commercial Insurers with the Highest Favorability Ratings
https://commercial.pandcspecialist.com/c/4491854/587354 | 6 | |
Copyright (c) 2024 Tokio Marine Holdings, Inc. | ||
I. Strategy of | International | M&A | PHLY | DFG | TMHCC | TMK |
Disciplined In / Out Strategy
- Our large-scale M&A track record (ROI) is +21.5%. Successful track record makes Tokio Marine an attractive acquirer for the next M&A
- Valuations are currently high, and we need to continue being patient with large-scale M&As, but we will seize opportunities for bolt-on M&As and continue to implement the In / Out strategy with discipline
Strict acquisition criteria | "In" strategy (M&A, new establishment) |
Cultural fit
Target
(Three High profitability principles
of M&A)
Solid business model
Cost of capital (7%) | |
Hurdle | + Risk premium |
rate | + Country interest rate |
spread |
- ROI*1 of our large-scale M&As is 21.5%, significantly exceeding our capital cost (7%)
- We have been steadily implementing bolt-on M&As. Most recently, TMHCC completed acquisition of GGEBS*2
Mar. 2008 | Dec. 2008 | May 2012 | Oct. 2015 | Feb. 2020 |
"Out" strategy (divestment, run-off)
- We are implementing the "Out" strategy also with discipline by determining the future of the business in a forward-looking manner
Highland*3 Guam TMPI | Saudi Arabia | ||
Mar. 2019 | Aug. 2022 | Life/Non-life | |
Dec. 2023 | Feb. 2024 | ||
*1: ROI is calculated by using the sum of business unit profits under FY2024 projection as numerator and the sum of | |
acquisition amounts as denominator (Different formula from ROE (=RoR / ESR) which reflects risk diversification | |
*2: Gulf Guaranty Employee Benefit Services, Inc. | |
A managing general underwriter that handles group gap medical insurance for small and mid-sized businesses. | |
Copyright (c) 2024 Tokio Marine Holdings, Inc. | *3: Agent handling construction insurance in the Tokio Marine Highland (former WNC) group owned by TMK |
effect, etc.)
7
I. Strategy of | International | M&A | PHLY | DFG | TMHCC | TMK |
Track Record of large-scale M&A
- Five subsidiaries acquired with large-scale M&A have continually outperformed market growth
- ROI is significantly above TMHD capital cost (7%) at 21.5%
Growth after joining the Group*1 | ROI of large M&As*2 |
<Top-line> | <Bottom-line*3> | <Top-line> | <Bottom-line> | <Top-line> | <Bottom-line> | |||||||
DFG | ||||||||||||
Market | TMK Market | 17.4% Market | ||||||||||
TMK | 7.0% | PHLY | 12.8% | |||||||||
5.9% | 6.6% | PHLY | DFG | |||||||||
5.3% | 6.4% | Market | Market | |||||||||
7.3% | ||||||||||||
4.2% | ||||||||||||
4.1% Market | 5.7% | Capital cost | ||||||||||
1.9% | ||||||||||||
21.5% | > | |||||||||||
2007-2023 CAGR | 2007-2023 CAGR | 2011-2023 CAGR | % | |||||||||
7 | ||||||||||||
▲189.8% | ||||||||||||
<Top-line> | <Bottom-line> | <Top-line> | ||||||||||
Pure |
TMHCC | |
9.7% Market | TMHCC |
6.1% | 5.4% Market |
3.1% |
2014-2023 CAGR
Copyright (c) 2024 Tokio Marine Holdings, Inc.
15.9% |
Market |
7.6% |
2019-2023 CAGR |
*1: TMHD top-line /bottom-lines are local financial accounting basis, Pure's top-line is the premiums under management company
Market for TMK: all Lloyd's companies, Other: North American non-life insurance (Source) Lloyd's Annual Report, S&P Capital IQ
*2: ROI is calculated by using the sum of business unit profits under FY2024 initial projection as numerator and the sum of acquisition amounts as denominator
(Different formula from ROE (=RoR / ESR) which reflects risk diversification effect, etc.)
*3: TMK proactively increased past reserve provision for some business lines (However, Syndicate 510 C/R was good level at 86%)
8
I. Strategy of | International | M&A | PHLY | DFG | TMHCC | TMK |
Track Record of Bolt-on M&A
- Room for bolt-on M&A based on in-depth understanding of mutual business
- Leverage the experience and expertise of TMHCC as our strength and steadily execute transactions
Advantages
of bolt-on
M&A
High success rate | : In-depth understanding based on a long-term business relationship |
Accumulated know-how : Experience of executing over 60 bolt-on M&As | |
Disciplined M&A | : Strategic portfolio adjustment taking the future business environment into consideration |
2015-2017
2018-2020
2021-
In
Pro Ag
(Crop
Insurance)
January 2015
AJF
(P.A.)
June 2015
AIG business
acquisition
(Medical stop-loss)
October 2017
International Ag
(Crop Insurance)
April 2017
WNC
(Property /
flood)
January 2018
Qdos
(Liability)
October 2018
NAS
(Cyber / liability)
April 2019
BCC
(Surety /
credit)
April 2019
A&H | SSL |
International | |
(Paid family leave) | |
(P.A.) | |
April 2021 | |
June 2019 | |
GCube | GGEBS |
(Gap medical | |
(Renewable energy) | |
insurance) | |
May 2020 | |
July 2023 | |
Out
On Call | Bail USA | Midlands | AmTrust Ag |
(Crop | |||
International | (Surety) | (Excess W/C) | |
(Assistance service) | Insurance) | ||
January 2016 | February 2016 | December 2018 | |
May 2019 | |||
Bail USA | Life Trac | ||
(Medical Service) | |||
(Surety) | |||
Divested in January | |||
Divested in April 2019 | |||
2020 | |||
Colors represent the acquiring companies TMHCC TMK
WWS business | Will find high |
acquisition | |
(Insurance for temporary | quality |
staffing industry) | transactions |
December 2020 |
Highland*
(Construction insurance)
Divested in August
2022
PHLY DFG TMMA (Australia)
*: Construction insurance agency, part of Tokio Marine Highland (former WNC) Group owned by TMK | 9 | |
Copyright (c) 2024 Tokio Marine Holdings, Inc. | ||
I. Strategy of | International | M&A | PHLY | DFG | TMHCC | TMK |
(Ref.) Rate Cycle and M&A Opportunities
- Valuations remain high for high-quality M&A transactions, requiring patience
- The market is cyclical and attractive M&A opportunities increase when the market softens; we will remain diligent
Rate Cycle*1(left axis) | Total transaction amount*2 (right axis) | (M$) | ||||||||||||||||||
15% | 60,000 | |||||||||||||||||||
10% | 50,000 | |||||||||||||||||||
40,000 | ||||||||||||||||||||
5% | 30,000 | |||||||||||||||||||
0% | 20,000 | |||||||||||||||||||
-5% | 10,000 | |||||||||||||||||||
-10% | 0 | |||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
(Ref.) Overseas business | |||||
expansion track record*3 | Dec. 2007 | July 2008 | Dec. 2011 | June 2015 | Oct. 2019 |
*1: U.S. Commercial market (Source) WTW, "Commercial Lines Insurance Pricing Survey" | ||
*2: Global deals announced between 2003 and 2023 in P&C sector with transaction amount of $100MM or more (Source) Dealogic | ||
Copyright (c) 2024 Tokio Marine Holdings, Inc. | *3: Dates listed are the announcement dates of the acquisition | 10 |
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Tokio Marine Holdings Inc. published this content on 11 July 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 July 2024 06:39:07 UTC.