My explanation will be based solely on the slides.

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Transcription:

I am Masataka Kitagawa from the Corporate Communications and Investor Relations Dept. of MS&AD Holdings. Thank you for finding the time in your busy schedules to participate in our conference call today. Today s materials include our Quarterly Earnings Report and Explanation for Business Results, in addition to the Materials for FY 2013 1Q Results Briefing Conference Call in slide format. My explanation will be based solely on the slides.

Please take a look at the first page of the slides in Addendum 1. I will now give a brief overview of consolidated earnings for the three months ended June 30, 2013. First of all, in our top lines, in addition to increased earnings in domestic non-life insurance companies, a significant increase in earnings of overseas subsidiaries in all regions contributed to net premiums written, which increased by 32.1 billion yen, or 4.9% from the same period in the previous year. Meanwhile, net income rose markedly by 71.8 billion yen from the same period in the previous year to 83.1 billion yen, and reached a record high since FY2007 when we started to announce quarterly results. This was largely due to a significant decrease in the loss on devaluation of securities resulting from an upturn in the investment market, along with a significant improvement in investment income due to a gain on sales of securities and improved net interest and dividends income. Also, Group Core Profit in FY 2013 1Q reached 77.1 billion yen along the forecasts at the beginning of the year.

Next I will provide an overview of the earnings of the two core non-life insurance companies for the three months ended June 30, 2013. Please take a look at Addendum 2. Net premiums written by the two companies combined increased by 20.7 billion yen, up 3.5%, due to factors such as increased earnings from fire insurance where household segment performed well, and auto insurance due to the effect of a rate revision, for both companies. Incurred loss decreased significantly by 20.8 billion yen for the two companies combined, compared to the same period last year, largely due to a decrease in domestic natural catastrophes, and caused steadily improvement of underwriting profit. On the other hand, the reversal of catastrophe reserves decreased by 34.7 billion yen compared to the previous year, due to a decrease in net claims paid for domestic natural catastrophes and the Thailand Floods. As a result, the combined underwriting income for the two companies was 38.8 billion yen, down1.4 billion yen compared to the same period last year. With regard to investments, loss on devaluation of securities was limited to 3.0 billion yen for the two companies combined, which was an improvement of 38.7 billion yen compared to the same period last year. In addition, the gain on sales of securities improved by 15.6 billion yen due to steadily sales of strategic equity holdings, and net interest and dividends received increased by 14.4 billion yen, resulting in the sum of investment income and other income improving by 84.9 billion yen to 65.4 billion yen. As a result, ordinary profit of the two core domestic non-life insurance companies rose by 83.4 billion yen to 104.2 billion yen, and net income rose by 60.5 billion yen from the same period in the previous year to 76.0 billion yen.

The impact of natural catastrophe losses is summarized here in Addendum 3. I will now explain details. The table in Addendum 3" summarizes the impact of "Natural catastrophe losses in Japan occurring during the current fiscal year and the Thailand floods losses. The natural catastrophe losses in Japan occurring during the current fiscal year amounted to 3.1 billion yen for the two companies combined, which was down 25.1 billion yen compared to the same period in the previous year when large-scale natural catastrophes occurred, despite storm damage caused by low pressure systems in April this year. Also, a total of 15.6 billion yen was paid by the Group during the three months ended June 30, 2013 for claims related to the Thailand floods. Furthermore, loss reserves ( Incurred Losses in the table) was decreased 7.7 billion yen for the entire Group, having the effect of progress of claims survey of Thailand Floods. The effect of exchange rate on Incurred Losses of Thailand Floods was minimal. As a result, the net claims paid during the three months ended June 30, 2013 for "Natural catastrophes in Japan occurring during the current fiscal year and the Thailand floods amounted to 17.6 billion yen, and the incurred loss was minus 4.5 billion yen.

Please take a look at the table at the top of Addendum 4. I will now explain the situation concerning the catastrophe reserves. The table here indicates the reversals and provisions for catastrophe reserves, and shows separate figures for Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance. As I indicated earlier in Addendum 3, the decrease in the impact of natural catastrophes and payment of claims for the Thailand floods and decrease of loss ratio of voluntary automobile insurance were the main factors that led to a significant decrease in the reversal of catastrophe reserves. This table states the net change in the balance of the catastrophe reserves. The net change was an increase of 19.9 billion yen for Mitsui Sumitomo Insurance and an increase of 14.8 billion yen for Aioi Nissay Dowa Insurance compared to the same period last year. The table in the lower section summarizes impairment of losses on securities, which decreased 51.9 billion yen compared to the same period last year. Strategic equity holdings are being sold steadily, and sales by the two companies combined during the three months ended June 30, 2013 totaled 29.5 billion yen.

Now, I would like to discuss the improvement in underwriting results for auto insurance. Please take a look at Addendum 5. The line graphs on the upper section show changes in the number of accidents compared to the same months in the preceding year for both Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance. The number of accidents decreased 6.2% for Mitsui Sumitomo Insurance and 3.1% for Aioi Nissay Dowa Insurance compared to the same period last year, reflecting changes in the number of traffic accidents throughout society as a whole, the effect of the company s efforts for loss control, and improvement of safety mind of policyholders after the revision of the non-fleet grade system implemented last October. Next, could you please take a look at the change in the average payout per claim shown in the middle of the table in the lower section. There was a continuing rise in the payout per claim for vehicles damage by both companies, reflecting an increase in repair costs in particular. At the same time, as shown in the section just above that, there continued to be an increase in insurance premiums for both companies as a result of rate revisions implemented last year and the year before last, resulting in insurance premium unit prices shifting at the level exceeding those of the same period in the previous year by over 2%. The lower section indicates the earned-incurred loss ratio for the three months ended June 30, 2013. The earned-incurred loss ratio for the first quarter and the third quarter are calculated using a simplified method in some part, as has been in the past. However, it can be inferred that underwriting results have been improving as expected due to conditions I described earlier.

Next, I will explain the condition of the domestic life insurance companies. Please look at Addendum 6. First, I will explain the situation of MSI Aioi Life. In sales during the three months ended June 30, 2013, amount of new policies decreased by 337.2 billion yen to 625.1 billion yen due to the impact of a rate revision in April and a revision of the portfolio of products sold. The amount of policies in force increased 212.8 billion yen from the end of the previous fiscal year to 20,287.4 billion yen. Net income for the quarter ended June 30, 2013 rose by 1.6 billion yen to 2.1 billion yen, due to a shift toward highly profitable products and a decrease in provisions for the policy reserve stemming from a decline in new policies. Next, at MSI Primary Life, amount of new policies increased by 44.3 billion yen from the same period last year to 115.5 billion yen due to the continued solid performance of foreign currency dominated fixed whole-life products, in addition to the solid performance of variable products resulting from the improved investment environment. The amount of policies in force decreased by 76.9 billion yen to 3,584.5 billion yen compared to the end of the previous fiscal year due to a high level of cancellations, reflecting a weak yen and high share prices since last year. Despite the decrease in market value of assets in fixed amount products mainly consist of Australian dollar denominated products, caused by the effect of rising interest rates and the strong yen and week Australian dollar during the three months ended June 30, 2013, net income rose by 2.2 billion yen compared to the same period last year, to 6.2 billion yen, due to factors such as commission income increasing as a result of an increase in the amount of policies in force for variable products compared to the same period last year, and gains from cancellation deductions.

Next, I would like to discuss on the overseas insurance subsidiaries. Please take a look at Addendum 7. Net premiums written increased in all areas, amounting to an increase of 10.5 billion yen compared to the same period last year, or by 20.7% to 61.7 billion yen overall. Meanwhile, net income for the quarter increased by 2.6 billion yen year on year to 9.4 billion yen due to improvements in reinsurance business, Asia and Europe.

In the following pages from Addendum 8 to Addendum 13, you will find the non-consolidated earnings of both Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance for FY2013 1Q. Please have a look at these. This concludes my presentation.