MS&AD Insurance Group FY2023 Results

FY2023 Results Highlights

• Strong Top Line Growth: Net premiums written surged by 328.5 billion yen (+8.4%) to 4,261.7 billion yen, driven primarily by significant growth in overseas subsidiaries. Domestic non-life insurance saw an increase of 27.5 billion yen, attributed to reinsurance inward from overseas subsidiaries, while overseas insurance subsidiaries experienced a 300.7 billion yen rise stemming from new business, rate hikes, and foreign exchange impacts.
• Record Profitability: Net income climbed by 158.2 billion yen to 369.2 billion yen, reaching a new high. Group adjusted profit also achieved a record level, increasing by 157.7 billion yen to 379.9 billion yen.

Key Drivers of Profit Growth

• Domestic Non-Life Insurance: Rebound from COVID-19 losses, increased investment profit, including accelerated strategic equity holdings sales, and higher earned premiums.
• Domestic Life Insurance: Rebound from COVID-19 related payments at MSA Life.
• Overseas Subsidiaries: Premium growth in Asia, Americas, and Europe, including MS Amlin. Strong profitability improvement at MS Amlin, coupled with profit increases in other regions, led to record high Group adjusted profit.

Breakdown of Profitability

• Domestic Non-Life Insurance (MSI+ADI): Net income increased by 72.7 billion yen, mainly due to a rise in investment profit.
• Domestic Life Insurance: MSA Life’s net income grew by 15.4 billion yen due to reduced COVID-19 losses, while MSP Life remained relatively stable.
• Overseas Insurance Subsidiaries: Net income increased by 87.2 billion yen, driven by overall premium growth, profitability improvement, and lower catastrophe losses at MS Amlin, along with favorable insurance service profit in Asia.

Analysis of Key Segments

Domestic Non-Life Insurance

• Underwriting Profit (Before Catastrophe Reserve): Decreased due to higher automobile insurance losses and natural catastrophe losses, despite increased earned premiums in automobile and fire insurance.
• Investment Profit: Increased due to higher interest and dividend income and gains on sales of securities.
• Voluntary Automobile Insurance: Premium increase influenced by changes in average payout per claim and insurance premium unit price, with an increase in the number of accidents and an E/I loss ratio rise to 70.9%.
• Impact of Natural Catastrophes: Domestic natural catastrophe losses increased significantly due to hailstorm in Gunma in July 2023. Overseas natural catastrophe losses saw a modest year-on-year increase.

Domestic Life Insurance

• MSA Life: Annualized premiums of new policies for the third sector increased by 5.9% year-on-year due to new product launches. Net income reached a record high of 28.1 billion yen, primarily driven by a decrease in COVID-19 related payments.
• MSP Life: Gross premium reached a record high of 1,353.5 billion yen, driven by favorable market conditions. Ordinary profit declined due to increased policy reserve provisions for foreign currency-denominated insurance, despite higher interest and dividend income. Net income remained at a similar level to the previous fiscal year.

Overseas Subsidiaries

• Net Premiums Written: Increased in Europe, Asia, and the U.S. due to new business expansion and premium rate hikes.
• Net Income: Increased by 87.2 billion yen, driven by profitability improvement at MS Amlin, positive business performance in Asia, and a rebound from financial market fluctuation impact in the previous year.

MS Amlin (Jan-Dec 2023)

• Insurance Service Profit: Improved significantly year-on-year due to top-line growth driven by market hardening, business expansion, and enhanced underwriting portfolio.
• Financial Profit: Decreased due to higher insurance service expenses, offsetting the improvement in investment income.
• Net Income: Increased significantly due to profitability improvement and a positive impact from recognizing deferred tax assets in Bermuda.

FY2024 Forecast

• Strong Continued Growth: Net premiums written are projected to increase by 338.2 billion yen (+7.9%) to 4,600.0 billion yen, driven by anticipated growth in both domestic and overseas subsidiaries.
• Further Profit Expansion: Group adjusted profit is projected to reach 630.0 billion yen, reflecting a 250.0 billion yen increase (+65.8%) from FY2023.

Key Drivers of FY2024 Profit Growth:

• Domestic Non-Life Insurance: Increased underwriting profit and investment profit, boosted by sales of strategic equity holdings, are expected to contribute significantly.
• Domestic Life Insurance: Profitability is anticipated to remain at stable levels, despite a projected loss on sales of bonds due to replacement strategies.
• Overseas Subsidiaries: Stable performance of AUL and MS Re is anticipated, with moderate growth in other regions.

Detailed Analysis of FY2024 Forecasts

• Domestic Non-Life Insurance: Net income is expected to increase significantly due to higher underwriting profit and investment profit, driven by sales of strategic equity holdings.
• Domestic Life Insurance: MSA Life’s net income is anticipated to be lower due to bond replacement strategies. MSP Life is expected to maintain stable profitability.
• Overseas Subsidiaries: Net income is expected to decrease due to anticipated declines in AUL and MS Re profits, offset by growth in other regions and overseas life insurance.

Major Assumptions for FY2024 Earnings Forecasts

• Domestic Natural Catastrophes: Conservative projections for natural catastrophe losses, including provisions and reversals.
• Overseas Natural Catastrophes: Assumptions based on historical trends.
• Sales of Strategic Equity Holdings: Significant anticipated sales of equity holdings, generating substantial profit for domestic non-life insurance.
• Financial Market Environment: Assumptions reflect current market conditions, including interest rate levels and currency exchange rates.

Key Initiatives for Future Growth

• Rate Increases: Continued focus on adjusting premium rates to reflect evolving risk profiles and market conditions.
• New Business Expansion: Continued development and launch of new products and services to meet evolving customer needs.
• Digital Transformation: Continued investments in digital technologies to enhance operational efficiency and customer experience.
• Global Expansion: Ongoing efforts to expand the group’s international presence and capitalize on growth opportunities in emerging markets.

Shareholder Return

• FY2023 Dividends: Total annual dividends per share for FY2023 were 270 yen (+70.0 yen year on year/+30 yen compared to initial forecast).
• FY2023 Share Buyback: A maximum of 50.0 billion yen share buyback was decided, with 10.0 billion yen already executed. An additional 150.0 billion yen share buyback was decided for capital level adjustment.
• FY2024 Dividend Forecast: The annual dividend forecast for FY2024 is 145 yen (after 3-for-1 stock split).

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