8766.T8766.T
LOADING
|||
Taizo Ishiguro: Good evening. Thank you for joining us today. I am Ishiguro of Global Communications. We will now start the conference call for the FY 2024 Results and FY 2025 Presentation as announced today. We will first start with the presentations from our CEO, Mr. Komiya, followed by CFO, Mr. Okada, by referring to the presentation material posted on our homepage today focusing on our earnings and capital policy. The presentation will be for about 15 minutes, after which we would like to take your questions. A disclaimer before we begin. The presentation may include business projections and forecasts based on information and assumptions available to us today, and is subject to risk and uncertainties. Please be reminded that actual results may differ from projections. Please note that we have a recording service for this conference call. Let me start over to you, Mr. Komiya.
Satoru Komiya: Good evening, everyone. My name is Komiya. Thank you very much for taking time out of your business schedule to join us today. I would also like to thank you for your continued support towards Tokio Marine. First of all, I would like to begin by explaining the content of the financial results for fiscal 2024 and the message from the management based on these results. Please turn Page 3 of the document. There are 3 main points I would like to convey to you today. The first point is about fiscal 2024 results. Our management places more emphasis on adjusted net income excluding gain on sales of business related equities, i.e. core profit [ph] business, and this figure on actual basis was JPY680.9 billion; this is an increase by JPY27.9 billion over the full year forecast announced most recently in February. This is due to the appreciation of the yen against the foreign currencies used by the comp P&C [ph] in financial results as of the end of March 2025 which reduced the burden of foreign currency denominated reserved for upcoming claims. Normalized basis adjusted net income excluding one-off effect was JPY679.0 billion, in line with the February forecast. This would translate to plus 14% year-over-year growth which is quite high. This was due to the strong performance of major international businesses, as well as the depreciation that the yen against exchange rate used to buy international business in their financial statements which is the exchange rate as of the end of December 2024 Another reason was due to the rate increase in Japan P&C and a decrease of large losses. Sales of business related equities amounted to JPY922 billion, exceeding the February forecast by JPY10 billion and 1.5x higher compared to the initial forecast. Source of dividends will come from actual adjusted net income including gains on sale of business related equities, which was JPY1.215 trillion, an increase of JPY35 billion from the February forecast, and 1.7x that of the previous year. The second point is the forecast for fiscal 2025 which is JPY700 billion excluding gains on sales of business related equities; this would be 3% growth compared to last year's normalized adjusted net income. This growth will be driven by continued strong performance of the major international business and also rate increase in Japan P&C. The reported growth rate will be calculated based on the FX assumptions we set at the beginning of the year for fiscal year business plan, where international business will be exposed to some impact on FX rate; this affirmative [ph] rate taken at the end of March 2025 is showing yen appreciation compared to the actual rate at the end of last year. Therefore, looking at the actual performance excluding FX factor, I think it is fair to say that the overall growth rate will be positive 7% to growth, and the underlying trend is favorable. The fund for sales of business related equities is currently assumed to be JPY600 billion, the same as the initial fund for fiscal 2024. And adjusted net income after completion of sales is expected to be JPY1.100 trillion. Adjusted net income including gain on sales of business related equities will be slightly affected by the pace of sales over the next 5 years, until we reach business related equity holding of zero. We believe that this is not directly related to corporate value, and we will continue to achieve world class growth with our core insurance business profit. The third point is about shareholder return. We continue to believe that the profit growth of our business and the expansion of shareholder return should be consistent. There is no change to that policy. In this context, the DPS for fiscal year 2024 will be JPY172, an increase of JPY10 over the forecast at mid-year based on the further upward revision of profit. This would result in DPS growth of 40%. Furthermore, DPS for fiscal 2025 will increase by JPY38 to JPY210 in line with the profit growth I have explained. This will result in DPS growth of 22%. In addition for capital stocks, we will continue to implement a disciplined capital policy. Since last year, we have announced our intention to spend 1% to 2% of EPS growth for share repurchase. Current level of ESR is at an ample level of 149%. We also have several investment opportunities in the pipeline, mainly for both on M&A. Taking all of these factors into consideration, we plan to repurchase JPY220 billion of our own share in fiscal 2025 for now. We will continue to implement share buyback flexibly throughout the year. But today, as its first step, JPY110 billion of share repurchase was approved. Mr. Okada, our CFO, will explain more on the capital policy later. Now, I'd like to explain these aforementioned points in a little more detail. Please go to Page 4. First is top line. Fiscal 2024 results; as you can see on the left, net insurance premiums increased by 10% year-over-year as announced in February. And excluding foreign exchange effect, it was an increase by 6%. For life insurance premiums on the right, due to the additional implementation of block reinsurance by Anshin Life in March, life insurance premium decreased by 44% from the February announcement. In this context, our full year forecast of 2025 is for a steady increase in net premiums written [ph] by 3% year-on-year, and by excluding foreign exchange factor, an increase by 5% year-on-year driven by rate increases in underlying -- underwriting expansion. Life insurance premium is expected to be 45% year-on-year growth due to the impact of the block seeded reinsurance program implemented by Anshin Life in fiscal 2024 and also in April 2025. Next is the adjusted net income. The actual progress for fiscal 2024 is shown on Page 5. As I explained earlier, we believe that analyzing and evaluating the normalized basis profit is more important in terms of measuring the strength of our business. So, please proceed onto Page 6. Normalized adjusted net income excluding gains on sales of business related equities for fiscal 2024 is JPY679 billion, an increase by JPY82.5 billion year-on-year, and 14% growth compared to the previous year. We would like to evaluate this four different businesses. First in Japan P&C business; there were some profits declining factors such as higher order loss cost, higher natural investor budget, as well as prior air reserve development for liability insurance in North America. However, we also have other factors such as rate increase in automobiles and fire, a decline in large losses and reactions from an increase in foreign currency denominated reserve for our outstanding claims in connection with the yen depreciation in fiscal year 2023. Japan P&C business unit profit increased by JPY28.8 billion from last year. In the International business, profit decreased in Asian life due to drop in interest rates and decrease in prior year reserve takedown, partly offset strong insurance underwriting and income revenues, especially in key entities and profit boosted by yen depreciation, resulting in an increase in profit of JPY29.7 billion compared to the previous year. Our full year earnings basically naturally hedged against the impact of exchange rates. In other words, yen-denominated profits in the international business and Japan P&C foreign currency-denominated loss reserve cancel each other out. But it is also true that the exchange rates used for financial results differ depending on the business. In light of this, exchange rate fluctuations in FY '24 were quite volatile. And the exchange rates used for financial closing of each business were all favorable to us. And as a result, the management's honest assessment of FY '24 profits is that there was a wind-aided element to it. And all in all, we believe that a plus 5% growth is a reasonable view. We also factored in a large capital loss on CRE loans in November of last year. To be honest, we were not exactly familiar with the CECL practice. And from our lessons learned, we have revised our average yearly expected capital loss. From minus $265 million, it was revised to minus $440 million. Please turn to Page 7 for FY '25 projections. Adjusted net income for FY '25, excluding capital gains from sale of business-related equities is projected to be JPY700 billion, and our planned sales amount of business-related equities is JPY600 billion and adjusted net income, including gain from sales of business-related equities projected at JPY1.1 trillion, as I explained at the beginning. Let's look at the breakdown by business. Japan P&C will have a 7% growth despite factors such as decrease in profits due to a decrease in dividends from sale of business-related equities and an increase in IT costs. There are positive factors such as absence of prior year loss reserve development for liability insurance in North America and the rate increases for auto. International business appears flat growth year-over-year compared to the previous year due to the strong yen, but excluding exchange rate impact, it is plus 5% growth due to steady growth in key entities and a rebound in the Asian life insurance year-over-year. That is all for me. As seen in the recent tariff policy, the global economy is becoming ever more uncertain and the business and management environment is by no means easy yet. Our company, Tokio Marine remains resilient. We will continue to achieve world-class EPS growth with a high degree of certainty driven by globally diversified, low volatility, robust underwriting and the strong income profits that come from this. By balancing EPS growth and disciplined capital policy, we will further increase ROE. We will manage and run the business with a strong will. Your continued support is very much appreciated.
Taizo Ishiguro: Thank you very much, Mr. Komiya. Let me turn to Mr. Okada for capital policy.
Kenji Okada: This is Okada, CFO. Let me cover shareholder returns and capital policy on Page 8. Once again, as we have stated before, the basis of our shareholder return is dividends and our policy is to realize EPS growth consistent with profit growth. The actual adjusted net income for FY '24, including the gains on the sales of business-related equities, which constitutes the source of dividend, as explained by Mr. Komiya earlier, were revised up. DPS for FY '24 has also been revised up by JPY10 from the midterm forecast to JPY172 with a DPS growth of 40% year-over-year. For FY '25, we expect a moving average growth in the source of dividend, on the back of continued favorable profit levels. So we will increase DPS by JPY38 to JPY210 and the DPS growth to 22%. Next, please turn to Page 9. Our thinking towards capital level adjustment and share buybacks as a means to achieve this remain unchanged. In other words, Capital generated through organic growth and portfolio review will first be used for M&A and risk-taking that will contribute to improving our ROE. And if such opportunities do not arise, we will carry out share buybacks as we have no intention of unnecessarily accumulating capital. Also, since last year, we have announced that we will achieve 1% to 2% of EPS growth through share buybacks. In light of this, we have taken into consideration the effect on EPS growth. In other words, the ratio against our current market cap of JPY11 trillion, the ESR level, our current pipeline of bolt-on M&As and the risk-taking opportunities due to environmental changes. And have decided to set their amount of share buybacks for fiscal 2025 at JPY220 billion for the year at this point in time. And today, buyback of JPY110 billion as a first step was approved. And finally, regarding the sales of business-related equities, please turn to Page 10. In FY '24, we ended up with a sale of JPY922 billion, far exceeding our initial plan of JPY600 billion as we reached agreement to sell from various customers -- counterparts. We plan to continue accelerating sales in order to achieve the milestone of having the balance at the end of FY '23 by the end of FY '26 as set out in the current midterm plan and achieving 0 by the end of FY '29. Therefore, for FY '25, although the overall market, for example, topics has fallen by about 4% compared to the beginning of last year, we have set a sales target of JPY600 billion, the same amount as last year as our initial plan. We will continue to execute our business strategy to raise both EPS and ROE and thereby respond to the expectations of the capital market such as yourself. That is all for me.
Taizo Ishiguro: Thank you, Mr. Okada. In the remaining time that we have, we would like to take your questions. Explanation could be given on how to ask questions in Japanese.
A - Taizo Ishiguro: Let us start the Q&A session. Any questions? So the first question now from SMBC, Muraki-san, please.
Masao Muraki: Regarding the impacts of inflation, please teach me. So this time for liability, the social inflation related lines of business in North America; I believe the provisioning was made, and it was quite a large provisioning. And also unit repair costs were also compared to the most recent assumption, I guess they have increased versus the year beginning the repair unit costs have increased so in the U.S. social inflation, and also in Japan, the inflation of the unit repair cost. Why is there a deviation between your assumption versus the actual results? And also for creating this year’s business plan, the assumptions that you have for the plans, does it assume that the inflation is going to exacerbate? Isn't that the risk part of your assumption for this year?
Satoru Komiya: Thank you for the question. And so regarding the social inflation situation in North America, and also for domestic also situation, we’d like to separate the question into two. So first, social inflation in North America; let me answer the question. So on that part, in Japan’s P&C, something -- the policies that we have assumed in Japan P&C for Japanese global company, and it's a global scale, global brand contract where in 2024 we have to be provisioning additional reserves. And for the policies we underwrite, the additional portion on top of the primary policy available in local markets. Of course, we do business in North America, so for the primary policy we do some underwriting there too. And we do have the loss cost increase that’s factored into the assumption of the businesses. So from quite a while ago, we have been provisioning additional reserves forever; therefore the excess policy which was underwritten by a Japanese entity. For the primary policy, we discover what is happening there, and then we do the case reserving as well. And most recently, for this particular fiscal year it exceeded the primary policy; so based on that, we decided to make additional provisioning. And rather than us being latent reacting, we look at the primary policy, and then we look at the excess policy and there was a gap between the two, we try to fill the gap. However, the social inflation issue in North America; we still need to keep doing the further development. So we will continue to keep our eyes on the trends. And then, regarding the domestic also -- of the increase our inflation, Kuroda-san [ph] will be answering your question.
Unidentified Company Representative: From the TMNF, from personal life run department, my name is Kuroda [ph]; I’d like to answer your question. So regarding the claim unit, the claim paid due to the enhancement and all the modernization, although we have a trend to increase, and that increase is even going up further. And in a chronological matter, in 2024 in the first half and second half, the unit claim growth exacerbated in the second half of 2024; that was the trend we saw last year. As you may know already, there is cost increase or inflation it’s the repair cost where it’s impacted the most, because 60% of repair cost is the part cost. And part cost increase had exceeded CPI even, but most recently, it's going up even further compared to the past. So that is one major cost factor. Another point is that the remainder of the repair cost, or 40% of this is labor costs, and for labor costs there is an increase in CPI and also appropriate time through to the labor cost; there is a trend to increase the labor cost or wage in Japan. As a result, the parts and the labor combined the total repair cost is in excess of CPI, it’s above CPI. And as you know, for fiscal 2024, at the beginning of the year, we were expecting positive 4% as an assumption. Actually, at the end of the year we discovered that there was 7% increase in costs at the end of 2024. For fiscal 2025, the CPI expectation by DOJ from 2024 to 2025, they were expecting some slowdown in the rated hike. And so we are expecting positive 6% growth in 2025 in cost. However, in any case, considering the current economic situation, we still have a lot of uncertainties ahead of us. And therefore, we need to continue to monitor the situation, and we need to be proactive and also react quickly whenever our situation changes. That concludes my question -- or my answer. Muraki-san, I hope that answers your questions.
Masao Muraki: Thank you. The reserve released by the international entity; I guess there is about JPY8 billion reserve release. But overall, do you still have ample reserve? And was that the adjustment or do you think there's no more room for further reversal to take place?
Satoru Komiya: Okay. So from [indiscernible] will answer the question.
Unidentified Company Representative: My name is [indiscernible]. I will answer to your question. Right now we are adequately provisioned, and therefore next year, the reversal -- as a job, but we don't have that to plan. But I can say to you, that we are well reserved at this point in time.
Masao Muraki: I understood well. Thank you for the answers.
Satoru Komiya: Next question, Taizo-san. Over to you.
Unidentified Analyst: Page 44 of the handout, about CRE loans. I think things have passed the peak, but in your projections there is a big drop, and in capital last year was big, but there was a decrease and so net-net this improvement. But in income, why is there a big drop? And what is the balance -- outstanding balance? I think you're working on workouts and so forth. What are the fruits of your initiatives?
Satoru Komiya: Thank you for your question. I'd like to ask Mr. Comano [ph] to respond to your question for financial planning.
Unidentified Company Representative: The reason why there is decrease in income for 2 reasons; one is the decrease in outstanding balance, and the impact of decrease in interest rates. And for outstanding balance, FY ’24 until from March 2024 to 2025 sorry, correction; from end of 2024 to end of 2025, $11 billion to $9 billion, this is how much there will be a decrease. And the big reason for that is due to -- associated to this decrease in outstanding balance. And as for the workouts that has been conducted, according to what we have disclosed the other day, there has not been any major changes; the underlying trend remains the same. For real estate loans, it has not deteriorated nor improved. The situation differs by projects, by deals, but the overall trend remains the same. Another point, if I may, is features are occurring at a certain level, but since our loans are single lenders, and therefore we are able to actively conduct workouts and we will exit from these foreclosed properties at an appropriate timing. And we are making efforts on that end.
Unidentified Analyst: So postponing or extending the maturity, I think you have done that once with renovation. You’ve done that during COVID. Are you going to do it again? Extending the majority twice, what would that mean? What would that entail?
Satoru Komiya: Well, extending maturity as a borrower, there are two challenges. One is more than what we expected. Interest rates have remained high, and especially for office loans after COVID, people are working more and more from home, and therefore less people are going to the office, and therefore demand for offices are going down. So these are the two reasons. And starting from the latter; demand for office. This is a structural change, and therefore we cannot expect a dramatic recovery in initial period of time. However, higher for longer interest rate situation, we will enter the negotiations with the borrowers so that borrowers can pay back the interest rate and to rewrite their business plan and work out together while we wait for the -- recover the economic conditions. And also the interest rate to be given, we will give discounts for interest rates. And if we're able to sell at a reasonable price at the exit, some premium work that we can profit, that we can generate from that will be utilized. And therefore we want to maintain return as much as possible.
Unidentified Analyst: So you will need to incur impairment loss and as soon as you conduct deductions. And you -- so we should assume that this should be -- should work out?
Satoru Komiya: Well, of course it will depend on the market conditions, and therefore we cannot say anything for sure. But capital loss for CRE loans, JPY230 million [ph] is expected for the full year. And under the current market environment, we believe that this reserve should be enough.
Unidentified Analyst: I see. Thank you very much.
Taizo Ishiguro: This is Ishiguro speaking, if I may supplement a few points. As you know, our international business closes in December. And therefore we are looking at the flash report for the first quarter. And if you look at Page 39, first quarter results compared to initial properties [ph], crossed JPY8 billion, of which JPY1 billion is from underwriting, and JPY7 billion is from investment; there is an upside vis-à-vis the original plan, and the part of that is CRE loan. And therefore, compared to what we expected, things have not deteriorated. And therefore, I think it's fair to say that we are on track. Next question?
Unidentified Analyst: I am looking at Page 10, the conservativeness already tells the business related efficacies [ph] and so you are expecting JPY600 billion and then JPY240 billion. Mitsubishi Corporation, Suzuki; some names have been announced. So what's the percentage of progress so far because I thought it was less than the number that you've announced but what’s the actual progress?
Satoru Komiya: From our CFO, Mr. Okada, he will answer your questions.
Kenji Okada: So for fiscal 2025, the JPY600 billion is a number that we have already announced, and including some of the stocks where we have already received the agreement and so at least the JPY600 billion to be sold for the fiscal year in terms of the progress. In the mid-term plan, by the end of 2025 we want to achieve the 40% achievement ratio on booked value basis. And towards halving it by 2026 we are making a healthy progress.
Unidentified Analyst: So JPY600 billion that we’ve said, what is your progress so far? What's the percentage of the progress so far? Do you mean at the end of April etcetera?
Kenji Okada: I don't have the number with me but I would like to get back to you separately. IR Team will get back to you.
Unidentified Analyst: Okay. Thank you very much.
Satoru Komiya: Let me add. So progress, I will get back to you later. In our plan, how we plan for this is that when we have the agreement from the share issuers, and then we multiply that with the stock price at the end of March. So we know the actual names when we create our plan, and we also know the booked value associated with those names; that's why we have announced the JPY600 billion last year, and also JPY600 billion this year. But then the capital gain is going to be higher by JPY10 billion because booked value of each name is different. And the last year we started with the JPY600 billion but then there were additional agreements we were able to gain in the middle of the year, and so we ended as JPY900 billion. Where it will go this year, we will continue to negotiate. It depends on how much agreement we can get. But this JPY600 billion, this is the amount that we will definitely be able to execute.
Taizo Ishiguro: Next question. Sato-san.
Koki Sato: Page 43, North America investment. There was an explanation about CRE loan earlier, but on Page 43 income for CRE loans is going to decrease, whereas here you are expecting an increase. Which asset classes are expected to be covered? And also under capital, according to top box, based on the current market situation, it says, but from what we heard from Komiya-san earlier, there were lessons learned from last year, and therefore you have raised the amount to be expected at the beginning of the year. So if you could explain once again how you come up with these expectations? What were the expectations? And if you could also briefly comment about infrastructure funds or any other specific exposures that vis-à-vis the average could underperform? So, if you could at least highlight those points, I’d very much appreciate.
Taizo Ishiguro: So the reason why income will increase, and what are the assumptions for capital loss and to buy asset class, anything that we should have -- keep note of, any colors on that. So, Komiya-san is going to explain.
Satoru Komiya: Yes. The reason why there is an increase in income is because of the outstanding investment. CRE loan is going to decrease but overall investment amount is going to increase, assets under management is going to increase; and the asset is the biggest factor. So JPY170 million increase in light of the market conditions. But in 2024, FY 2024, original projections; a year has passed since then, and so from fall of last year we have set aside quite a large CECL provision. And the reason for that, to give some context, is -- in looking at our portfolio, there were an increased number of properties that required workouts. And therefore towards the second half of the year, we brought whole things onboard to look at the CRE loan properties one by one, and look at the property value of each of the properties. And it came to the decision of setting aside more provisions with CECL. so that is reflected in this number. And asset classes that you should be aware of. Well for us, it's not that there is any particular asset class that we should be aware of, that we should monitor closely. But CLOs [ph] with relatively high exposure and high yield of corporate bonds and private credit with the slowdown in economy or inflation progressing and high interest rates that could impact the repayment capability of the board [ph]. And so whether there will be an impact on that, we are monitoring on a daily basis. But CRE and corporate bonds, we are looking at the split, but beginning of April, after the announcement of tariffs, they widened but since then, it has tightened. And therefore it's not that we have anything in particular of grave concern.
Koki Sato: I see. Moody’s sovereign rate reduction. Any concerns about that?
Satoru Komiya: Well, moving to Moody’s, it’s kind of following the trend of other credit rating agencies in rate cuts, and therefore we kind of factored that in. We had -- that was expected, and therefore our investment activities are not affected by Moody’s rate cuts.
Koki Sato: I see. Thank you very much.
Taizo Ishiguro: Thank you very much. Next, will be Sakamaki-san from Mizuho Securities, please.
Naruhiko Sakamaki: I have one question. If I go to Page 11 on the assumption for natural catastrophes; for 2025 on business unit property basis, I believe the California wildfire is included and considering that the natural catastrophe related claim payment expectation; isn’t it too low. So including Japan, I want to see versus the medium term management plan or versus last year, why you have created this budget for national catastrophe for Japan and international?
Satoru Komiya: So for the overall budgeting that will be answered from corporate accounting, and then for the international business, there will be further answers from [indiscernible].
Unidentified Company Representative: From Tokio Marine Holdings, my name is Komasu [ph] from Corporate Accounting. And I can answer your question. So first of all, if you go to Page 11 regarding the NATCA [ph] budget, there was a question. And originally, for domestic business, in -- for under 2, we had JPY74 billion as a part of the budget for mid-term fund. In 2023, it was JPY62 billion but because of the worsening of secondary peril, we have increased the budget amount and now in the mid-term plan it’s set at JPY74 billion. And for 2025, because of the increasing exposure, we have set the budget to be JPY76 billion, increased by JPY2 billion. And for international insurance or business, in every year we consider the actual exposure of recent deposits. In the mid-term plan, it was set at JPY69 billion. For 2025, the year beginning budget it’s JPY73 billion, an increase from JPY69 billion considering the amount of exposure.
Unidentified Company Representative: And now regarding California wildfire and the actual amount related to fire, and also relationship to the budget. My name is Huncho from IBDB [ph]. As you mentioned, the LA wildfire, it did happen in the first quarter; that is included in the first quarter results and the payment -- expected claims payment ending on March [ph]. On top of the LA wildfires, there is also a natural capacity situation; at other entities which is an increase for JPY4 billion, we have strong wind planned and another secondary part to the profitability. We are tiering off these policies and for the low profit policies, we are increasing rates and also reviewing the terms and conditions, and also sometimes the non-renewable option of the problematic policies. And this is our effort in trying to reduce the risk and also improve profitability through those efforts. Overall, we have decided to increase that amount by JPY4 billion.
Naruhiko Sakamaki: So other than LA wildfire, the risk exposure by international; it was being cut, it was being reduced. Is that correct?
Unidentified Company Representative: In terms of risk exposure, we were able to reduce it. Including those risk mitigation measures, I believe some of them will surface.
Taizo Ishiguro: Thank you. Sasaki-san from Nomura.
Futoshi Sasaki: One question about international business. I would like to ask for your -- tell me how to see it; the impact of tariff? And with the Trump Administration, drug prices to be reduced and guidance has been revised down by pharmaceutical companies in The United States, I think the trend has kind of changed. And for your international business, impact from Trump's Administration or tariffs, are you factoring it in in this fiscal year's guidance or are you not factoring in at all? How is it factored into your budget?
Satoru Komiya: I see. Thank you very much. Impact of Trump. So, I want to ask Huncho-san of IBDB [ph] to respond to this question.
Unidentified Company Representative: Thank you for your question. Policies of President Trump is not implicitly factored into our plan. Half of our business profit is from North American business, but there are certain uncertainties; we cannot deny that. But tariffs could lead to goods and services and inflation, and therefore to lost cost. However, North American business for us is property, auto [ph] where tariffs impact effect is relatively small. We are focused on properties, and therefore impact from economic policies of President Trump should be limited. But of course, we do underride poverty which would require increase in rates higher than inflation or rise in costs.
Futoshi Sasaki: Thank you very much for that. How drug prices, or our benefits are rising rapidly with the pharmaceutical industry trends, we do not have to worry much about that?
Unidentified Company Representative: Well, thank you for that question. It's not that we don't have to be concerned at all. There will be certain impact but when it comes to medical insurance or impact of drug prices, as I said, a rate increase more than lost cost -- it should be enough to carry forward such trends.
Futoshi Sasaki: I see. Thank you very much for that.
Taizo Ishiguro: Thank you very much. From [indiscernible].
Unidentified Analyst: If I go to Page 39; for this year, the International Business Unit profit for Europe and Middle East on local currency basis, and also, I think you are assuming the yen appreciation. So on yen basis, the profits is -- has lacklustre in growth prospect for 2025. What is the background behind lacklustre in growth for some of the international businesses?
Satoru Komiya: So excluding FX, they are expected to have some negative global shrinkage. And so from Honcho from IBDB [ph] will answer that question.
Unidentified Company Representative: And so Latin America and Asia, in Brazil, including Latin America -- in Brazil, in 2024, as well as in 2023, they had all-time high profit. And we are still having profits close to that level; and so the profitability is high. Combined ratio is in the latter half of the 80% [ph]. And so high profits are coming from the Brazilian business. In those years, however, this will be exacerbated competition, etcetera. In recent year the loss expectation is now back to the normalized level, and this is contributing to declining profit. However for Brazilian business, combined ratio being in the first half of 90% [ph] which is already highly profitable, and that will continue. For Asia, for 2024 -- Asia or Oceania, within this region for 2024 was negative; and it's because of the -- it was the reaction from the reversal visa related to COVID in Taiwan in the prior year. In Malaysia, Thai and Indonesia and Singapore, they had all-time high profits; so they are still making growth. And also for the highest profit and also low loss ratio were corrected, and so we are expecting some declining profits for Asia and Oceania. That concludes my answer.
Unidentified Analyst: Additionally for life insurance, is it that you are assuming rate hike? And you're expecting recovery by JPY39 billion?
Satoru Komiya: The JPY39 billion is of changed reaction. In the prior year, it was a lot of decline, and then it's a reaction from that; so it's not that we are expecting interest rate hike.
Unidentified Analyst: Okay, I have got you. Thank you very much.
Taizo Ishiguro: Niwa-san [ph] from Citigroup.
Unidentified Analyst: Kind of progressing from earnings but I have a question on M&A pipeline. For the past year, how have you been contemplating; that's what’s realizing M&A? And how do you plan to go forward? You want to talk about M&A pipeline in your comments, but I don't think there are any M&A to study [ph]. So what's the situation? And [Technical Difficulty] after sharing of data thing about business related equities, were you able to -- how were you able to achieve organic growth?
Satoru Komiya: I really want to have a bit of [Technical Difficulty] before your question. I'd like to ask Okada, our CFO, to respond to this question.
Kenji Okada: Thank you for your question. With regards to M&A, there are 3 disciplines that we will apply considering M&A. And the M&A pipeline that you briefly mentioned, I think we basically refer to both on M&A; the large M&As because of the enhanced uncertainty of the financial market, valuation still remains high. And therefore, in North America and for Europe, our group companies in those regions will look at their own existing businesses and the local situation. And bolt-ons of FDA [ph] and local insurance companies are currently being contemplated via M&A pipeline. So organic growth, plus bolt-on, especially in the specialty business in North America, this is what we’d like to grow. Our basic thinking has not changed, and the plan that we presented today does not factor in any growth from M&A pipeline. So if there is M&A -- bolt-on M&A, that will be realized throughout the fiscal year, that will be an add-on factor.
Unidentified Analyst: I see. Thank you very much for that.
Taizo Ishiguro: Any other questions from the participants? I don't see any hands up. If not, I would like to conclude, since it's time. If you think of any additional questions, do not hesitate to contact the IR Team with your recommendations [ph]. Thank you very much for your presentation. That concludes the fiscal 2024 financial announcement, as well the forecast for fiscal 2025. This is the end of the telephone conference. So if you have any questions or concerns please contact the IR Team. Thank you very much. This is the end of the meeting.