I am Hamada, Group CFO of Sompo Holdings. Thank you for joining our earnings call despite your busy schedule.

I will go through the first-half results and the full-year earnings forecast for FY '25, as well as the shareholder return, all of which we disclosed today. Please turn to page 3 of the presentation.

This is the executive summary. First, the overview of the FY '25 first-half results.

Driven primarily by a decrease in nat cat in Japan and globally, profitability improvement in domestic P&C business, and strong net investment income overseas, adjusted consolidated profit increased by 78.1 billion yen year on year to 247.4 billion yen. Next, the full-year FY '25 earnings forecast.

Based on the first-half results, adjusted consolidated profit for the full year is revised up by 77 billion yen from the initial forecast to 440 billion yen. Although direct comparisons are not possible due to our transition to IFRS accounting this fiscal year, we expect to significantly surpass our previous record-high profit.

Last but not least, shareholder returns. The total shareholder return for the first half of FY '25 is 145.5 billion yen, including 77 billion yen of share buybacks.

For the full year, in addition to the upward revision of adjusted consolidated profit, the plan for the sale of strategic shareholdings has also been revised up from 200 billion yen to 250 billion yen. Therefore, the total shareholder return comprised of the basic return and gains on strategic share divestitures is expected to be approximately 250 billion, 26 billion yen higher compared to the initial forecast.

I will elaborate on these three key points from the following pages. Please turn to page 4.

The 78.1 billion yen year-on-year profit growth was driven by profit increase of 54.7 billion yen in the domestic P&C business. Compared to last fiscal year with significant hail damage, we had fewer major nat cat in the first half of this year.

Improvements in the base profitability of fire insurance, thanks to the rate revision implemented October 2024 as well as strengthened underwriting, also contributed to the profit growth. The profit also grew for the overseas business by 20.7 billion yen.

Similar to the domestic environment, fewer natural disasters and increased investment income driven by growth in assets under management contributed to this profit growth.

On page 5, let me explain the upward revision of FY '25 full-year forecast. Full-year adjusted consolidated profit for FY '25 has been revised up by 77 billion yen to 440 billion from the initial forecast.

On year-on-year basis, it is to be a significant profit increase by 116.3 billion yen, renewing record high both on consolidated basis and for all business segments. Based on first-half results, second-half forecast has been revisited with a certain level of conservatism.

On page 6, I'll explain shareholders' return. As to interim shareholder return for FY '25, dividend per share is 75 yen as initially forecasted, totaling 68.5 billion yen.

Share buyback with basic return and sales gains on strategically held shares combined amounts to 77 billion. Full-year shareholder return forecast for FY '25 is expected to be 250 billion yen, up 26 billion against the initial forecast, driven by increase in adjusted profit and increased reduction of strategic shareholdings.

Lastly, some supplementary explanation on domestic P&C and overseas insurance. Please look at page 7.

First, let me explain domestic fire insurance. Fire insurance, even without favorable nat cat experience, it's showing strong improvement driven by rate increases and enhanced underwriting.

Loss ratio of fire insurance for FY '25 full year without nat cat impact is expected to improve to 32% by 4.3 points year on year and by 2.4 points against initial forecast. Impact from last year's rate revision and underwriting enhancement is expected to continue and positive profit is becoming well-established.

Meanwhile, auto insurance, excluding nat cat impact, remains in a different situation. Given the first-half results, the assumption for the second half have been revisited and reflected in forecast.

As traffic volume increased, rate of accident frequency in the first half FY '25 was up 0.6% year on year against the initial forecast of down 1%. Accordingly, full-year forecast has been revised up to the level of the first-half results.

Unit repair cost in first half FY '25 was up 7% year on year, mainly driven by price hike of auto and its parts due to higher performance as well as inflation. Accordingly, full-year forecast has been revised up to the level of first results.

In January, auto insurance rates will be revised up by 7.5% on average. This revision has factored in higher-than-expected rate of accident frequency and unit cost, meaning mid-term our outlook for profitability improvement remains intact.

Lastly, supplementary comment on overseas business. Currently, rate environment is becoming softer, but insurance revenue increase in all segments, namely commercial, reinsurance, and consumer, driven by geographic expansion and other growth strategies.

Combined ratio is expected to be on a favorable level with certain level of prudence included. With that, I end my presentation.

Long-term management strategies, including progress on MTMP, will be explained at the IR meeting scheduled on November the 25th. Thank you for listening.

Watanabe-san, thank you. Next question is from Sato-san of J.P.

Morgan Securities. My first question is about Palantir and its size.

According to earnings report and looking at consolidated statement of changes in equity, I understand that you have transferred 250 billion yen from investment in equity instruments to retained earnings, and you have about after-tax sales gains of 90 billion from the selling of strategically held shares. That means about 150 billion yen the post-tax capital gains by selling Palantir shares.

Earlier you talked about the possibility of using those gains for Aspen. As you explained at the time of the Aspen acquisition, there was some the investment profit loss in the funding, and you assumed about 15 billion yen.

Is there any expectation that this the loss can be alleviated or be less? Thank you for the question.

I cannot talk about details about any individual shares, but it seems that you have read correctly. You're right about that second half of your comments.

When we were considering to acquire Aspen, of course we did not think about how much we should use the capital gains from Palantir shares for the acquisition and so on. We just set the rough percentage of the acquisition amount.

Based on that, I would say that the investment profit loss actually will be less than expected. Thank you.

My second question is about domestic fire insurance and its improved profitability, especially when you look at expense ratio. In your plan, you originally assumed about 30% for fire insurance, if I remember correctly.

Now I think it has been reduced looking at page 28. Original 30% expense ratio is now at 28.3%, and on an absolute amount basis, it has come down to some extent.

What kind of initiatives are involved there? Sato-san, thank you for the question.

The expense ratio of fire insurance, well, initially at the beginning of the year, we assumed about agent commission, and we were rather on the conservative side in assuming the commission level. Given the actuals, given the current status, what the other things are in a very favorable status, and we have made revision.

I think it was part of your strategy to revisit the relationship with your agents. It's not that it is behind this revision, it's not emerging yet in this fiscal year, am I right?

In that sense, I would say that the other agent commission included, we are now working on the overall relationship with agents, and a part of it is included in here as well. That's clear.

Thank you.

Thank you, Mr. Sato.

Next, Mr. Takemura from Morgan Stanley MUFG.

Yes, this is Takemura from Morgan Stanley MUFG. I have one question, which is about how you think about ESR.

I am looking at page 16 on the presentation. You have indicated the impact of the Aspen deal, which is pushing down the ESR by roughly 30 percentage points, and you stand at 250.6%.

Without the Aspen deal, it would have stood at 280% approximately. Moving on to the next slide on page 17, you show that you have 5 trillion yen of adjusted capital and risk amount of 1.7 trillion yen.

The simple math gives me 294%. There is a difference of roughly 14 percentage points.

Other than the Aspen deal, are there any factors that will be impacting the ESR? Yes, thank you, Mr.

Takemura. Regarding how we think about ESR, as we indicate on page 17, and as you pointed out, we show the adjusted capital and the risk amount.

This is a rough calculation, and we round down the numbers. There is some gap between the simple calculation and the actual ESR, and that is a primary reason for that deviation.

I see. Thank you very much.

Also, you have sold some of the shares in Palantir, and even with that, the ESR will be in excess of 250%. In managing ESR, I'm sure that you are looking inorganic opportunities, including the one for the domestic wellbeing business.

A certain level of excess over 250% is going to be something that you will tolerate? Should we expect the ESR to be in excess of 250% to a certain extent?

Yes, this is Hamada speaking. As we set the upper limit, we recognize that our ESR is in excess of that upper limit.

The reason we set the upper limit is because we want to achieve and manage the ROE. We look at how is the ROE level, and also how we strike balance between investment and shareholder return.

With that in mind, we deal with the capital that is in excess of the upper limit. Thank you.

I see. Thank you, Takemura-san.

Next question is from Sakamaki-san of Mizuho Securities. Here is Sakamaki, Mizuho Securities.

I have two questions: one for domestic business, another for overseas business. Starting with domestic business, I'd like to ask about combined ratio of auto insurance.

Like fire insurance, expenses are lower than your initial forecast. Initially, you also assumed increase in systems investment expenses.

Rate revision, agent commission, and systems investment all included, could you please talk about profitability of auto insurance business? If there's any time lag of booking for systems investment, could you please talk about that, too?

That's my first question. Sakamaki-san, thank you for the question.

As to expense ratio of auto insurance, here the factors involved are more or less the same as factors for fire, namely the agent commission ratio, the contribution is significant there. As to systems investment and other nonpersonal cost and any potential time lag, well, things are moving on in line with the plan, and the size or the amount involved remains unchanged from the initial forecast.

Thank you. My second question is about overseas business.

I would like to know more about the actual real performance as to combined ratio assumption without discount. Initially, it stood at 95%, it is now 94.9%, the difference is only 0.1%, but the nat cat impact was revised down by $200 million.

Maybe there are other factors which were actually worse than initial factors? Combined ratio without the discount, as we touched upon earlier, this fiscal year the rate level and the contract terms, we're looking at those elements, and we are making shift in our portfolio mix to casualty line.

As to casualty line, for example, compared to property line, volatility is very low, while expected loss ratio is a bit high. As a result, when combined ratio without discount impact is in line with the initial forecast, the major reason there is the changes in the portfolio mix.

Going forward, base loss ratio might go up, but the volatility will be less going forward. Compared to initial forecast, more changes in portfolio mix.

I understood. Thank you.

Thank you, Sakamaki-san. Next, Mr.

Sasaki from Nomura Securities. Yes, this is Sasaki from Nomura Securities.

I would like to ask two questions. First, on the improvement of the profitability for the domestic fire business, is the magnitude of the profitability improvement going to get larger next year?

My second question is regarding page 56 of the presentation deck. You mentioned that for the overseas insurance business, the combined ratio, compared to what you presented from the FY '24 results, the combined ratio projection seems to have been raised.

Is it because the business is deteriorating from the original plan, or is that because of the change of the portfolio mix that you explained earlier, or is it both? Also, generally speaking, listening to the global insurance companies, they talk about the impact of the softening market.

Looking at the Q3 and beyond, and also for next fiscal year, what is your outlook for the overseas underwriting profit? Yes, Mr.

Sasaki, thank you for those questions. First, regarding the improvement on the profitability of the domestic fire business, and is it going to be sustainable?

As we explained earlier, as the policies are rolled over, we will see improvement in the profitability. Basically, this benefit will continue to be observed next fiscal year.

Of course, all the policies needing such improvement within our total portfolio will get smaller in terms of the proportion. In that sense, if we look at the improvement year over year, the magnitude would be more moderate.

Regarding your second question on the overseas combined ratio, like you mentioned, this is mainly due to the change in the portfolio mix, and the impact is bigger than initially expected. Thank you for that response.

I have a follow-up question. Now looking at the same risk-based or risk amount, do you see any lines of business where you see a big downward pressure on the rate, or do you not have much visibility?

Your question is around the overseas premium rate, is that correct? Yes, that is correct.

Yes, I will take that question. It varies quite significantly depending on the line of businesses.

As for the property policies, we see softening of the market. On the other hand, for the casualty products, especially for the excess layer products, we continue to see relatively high rate.

We still see some hardening of the market. We will underwrite in a selective manner to build a profitable portfolio.

That is what we have been explaining as a change in the product mix. I see.

Thank you very much.

Sasaki-san, thank you. Next question is from Majima-san, Tokai Tokyo Intelligence Lab.

Here is Majima. I also want to ask about fire insurance.

So-called 2025 problem has arrived. It used to be 30-year maturity.

Now more and more policies renew every 10 years or so. From September '25 through September '26, during that one year, I think that there will be more renewals than normal level.

That impact has not been factored in yet? That's my first question.

The second question is about fire insurance premium. It seems that the premium is increasing faster from the first quarter to the second quarter this year.

Is it because of some large policies, or is it the phenomenon observed every year from first quarter to second quarter pace up in increase in premium? Majima-san, thank you for the question.

As to your first question, fire insurance loss ratio and the impact of massive renewals coming up, if it is factored in or not. As to fire insurance loss ratio, as denominator is insurance revenue or earned premium.

As to massive renewals, basically on written basis, the renewals are expected to increase during this one year that you mentioned, but it would not give big impact on base loss ratio. As to your second question, fire insurance and its premium, you said that maybe there's some acceleration of the pace in the second quarter.

That is actually a phenomenon which is unique for IFRS. In the first quarter, the insurance revenue was booked on a smaller side than the larger side, and in July to September period, usually partly because of nat cat, fire insurance losses tend to be larger.

In the second quarter, at IFRS, because of this seasonality, insurance revenue tends to be booked larger. It's not that there's some special factor or some unexpected against the plan happened.

Thank you. Thank you, Majima-san.