ギャンブル サイト18 2Q Results Conference Call Summary of Q&A

Described below is the summary of Q&A session with institutional investors and securities analysts at the ギャンブル サイト18 2Q results conference call held on November 19, 2018.

Q1Regarding ギャンブル サイト18 revised projections of your international insurance business, you have upwardly revised Europe’s profit which the progress rate was low in 1Q. What factors were behind this? Also, some insurance companies increase reserve provision in the U.S. and Europe. Is it okay to think that this won’t happenin your Group?
A1

We upwardly revised Europe’s profit by 2 billion yen due to a decrease in natural catastrophes and the impact of FX gains. Profitability of our European business, excluding these factors, has also been improving. However, we will continue to monitor trends since natural catastrophes have been occurring at overseas these days. Regarding reserves, we do not plan to increase reserves at the current moment.

Q2In light of this year’s net incurred losses, do you have any plans to raise your natural catastrophe funds from ギャンブル サイト19?
A2

Considering the recent trends of natural catastrophes, we increased the average annual level of natural catastrophe funds from 40 billion yen to 50 billion yen (TMNF) from the current mid-term business plan. This amount is set based on the past payoutギャンブル サイトelating to natural catastrophes and the risk model, etc., and we think that it varies depending on the year. Because this year’s natural catastrophe losses are within the range assumed by the model, we do not plan to revise the average annual level at this time. However, we will continue to keep a close eye on the future trends.

Q3You revised the full-year projections of net incurred losseギャンブル サイトelating to natural catastrophes in international insurance business downward from 50 billion yen to 38 billion yen. You have already consumed 11.2 billion yen in 1H, but how much impact do you estimate the wildfire in California occurred in 2Hwould be?
A3

We are currently collecting information on it, and we will soon closely examine its impact on our financial results.

Q4Delphi had a strong performance in 2Q following last year. Do you think you could keep that?
A4

Although we had a positive impact of U.S. tax reform last year, our asset management this year shows favorable performance. We will continue to maintain Delphi’s positive performance by leveraging its strength, asset management capabilities.

Q5I would like to know about the reinsurance program for domestic natural catastrophes.
A5

Regarding retention reinsurance, we decide the policy considering comprehensive assessment of stability and profitability of underwriting results, capital efficiency, solvency margin rates, reinsurance market trends, and businesギャンブル サイトelationships with partners, etc., while balancing underwriting risks and reinsurance costs.
We have arranged reinsurance programs to respond to various natural catastrophe risks so that our financial soundness is secured even in once-in-several-century catastrophe. The program does control net incurred losses within ギャンブル サイトixed amount, but please understand that we cannot tell you details of our reinsurance program.

Q6Could you explain the reason why shareholder return for capital level adjustment was 100 billion yen and why it was implemented by share repurchases and one-time dividend?
A6

Regarding capital level adjustment, our policy is to execute with flexibility based on relevant factors, such as market conditions and business opportunities, etc. and maintain discipline of capital strategy. As of the end of Sep. 2018, ESR before the capital level adjustment was 201%, which is still close to the ceiling of our ESR Target Range, and this level enables us to cope with rapid environmental changes. Furthermore, we decided to implement the capital level adjustment of 100 billion yen from comprehensive perspectives such as future business investment opportunities, etc. As a result, ESR iギャンブル サイトeduced by 4 points to 197%. As for one-time dividend, we have been considering other ways of adjusting capital level since last year, although still giving priority to dividends as means of shareholder return. In order to meet various investors’ needs, we decided one-time dividend of 50 billion yen and share repurchase of 50 billion yen, equally distributing the total amount of capital level adjustment of 100 billion yen.

Q7TMNF's net incurred losses in ギャンブル サイト18 projections, excluding the factors of natural catastrophes and foreign exchanges, increased by 12.9 billion yen from the original projections. What is the factor? Also, you project natural catastrophes losses to be 220 billion yen. Could you tell me about thelosses based on a direct underwriting basis and the proportion of corporate properties?
A7

Besides natural catastrophes and FX, we mainly project an increase in large losses in fire insurance. Please understand that we only disclose ギャンブル サイト18 projection of natural catastrophes on a net basis. Regarding corporate properties, we make forecasts reflecting the current conditions, so we do not calculate the proportion.

Q8How much natural catastrophe losses do you projectin 2H? Many hurricanes, etc. have already occurred in North America, but how much is left from your budget?
A8

Regarding the natural catastrophe projections in 2H, domestic nat-cat losses were 213.1 billion yen in 1H, compared to ギャンブル サイトull-year projections of 237.0 billion yen, and international nat-cat losses were 11.2 billion yen, compared to ギャンブル サイトull-year projections of 38 billion yen. The differences will be the 2H’s projection. As to the natural catastrophe losses for Hurricane Florence and Michael in North America, we are in the process of gathering information from each subsidiary. We project net incurred losses to be several billion yen for each Hurricane.

Q9I would like to ask why the record date for one-time dividend is at the end of September.
A9

We announced to add one-time dividend as a means of capital level adjustment last year and this time we have decided the adjustment of capital level based on ESR at the end of September. So we set the record date at the end of September in order to adjust the capital level in a prompt manner.

Q10Do you consider the domestic natural catastrophes that occurred in this term to be within the scope of your company’ギャンブル サイトisk management? Additionally, does it affect policies such as underwriting policy of natural catastrophe risks, arrangement of reinsurance, and provision for catastrophe losギャンブル サイトeserves after the next term?
A10

Considering the past payments for natural catastrophes and our risk models, etc., we see net incurred losseギャンブル サイトelating to this series of natural catastrophes to be approximately one-in-30 year scale, and is not beyond our expectations or tolerances. Because we have assumed these kinds of stressed scenarios and built up a sufficient capital base including catastrophe losギャンブル サイトeserves, we believe that this series of natural catastrophes has little impact on our financial soundness. Accordingly, we are not considering provision for catastrophe losギャンブル サイトeserves above the standard, etc.

Q11Do the domestic natural catastrophes occurred in this term affect the targets of the mid-term business plan?
A11

We are not thinking of changing the targets at this time as it does not exceed our expectations.

Q12The amount of reinsurance claimギャンブル サイトecovered for the series of natural catastrophes seems to be lower than that of other companies. What is your reinsurance policy?
A12

General risk hedging measures for huge catastrophes include reinsurance and catastrophe losギャンブル サイトeserves system, and we think that the balance between them is important. We decide reinsurance strategy by considering the way the coverage should be, the cost required, and catastrophe losギャンブル サイトeserves, etc., and we will continue to make decisions while examining the balance between the risk hedge effect and its costs.

Q13Business unit profits at TMNL was revised upward. Is this because of the rise in interest rate? A decrease in profits due to system investments was projected at the beginning of ギャンブル サイト18, but is that factor included?
A13

ギャンブル サイトactor of upward revision in business unit profits is mainly due to the rise in interest rate as you mentioned. The impact of system investments is included in the revised projections.

Q14Did you set the record date for one-time dividend for the capital level adjustment on Sept.30 considering stock price? Do you also aim to promote shareholders’ long-term holding?
A14

The purpose of one-time dividend at this time is the capital level adjustment and we haven’t just considered stock price. But we do expect that our disciplined capital policy leads to shareholders’ long-term holding.

Q15How will you enhance profitability of fire insurance in ギャンブル サイトuture?
A15

Fire insurance covers a lot of natural catastrophe risks, and we recognize the improvement of profitability as an urgent issue. We will firstly implement management efforts including the reduction of business expenses, we will examine the appropriate level of rate while carefully watching its profitability trends, etc.

Q16What are ギャンブル サイトactors that gains/losses on sales of securities at TMNFdoes not change so much in full-year projections while its progress in 1H was high?
A16

Gains/losses on sales of securities mainly result from sales of business-related equities, but we haven’t changed the projection because the total amount of sales will still be 100 billion yen.

Q17There are some concerns about the downgrading of corporate credit abroad, but will you continue to implement asset management that takes credit risks?
A17

We recognize that there are concerns about corporate credit mainly in the U.S., but based on such economic environment, we are considering our risk-taking activities in a comprehensive manner within our company’ギャンブル サイトisk management framework. Delphi, which has strength in management of credit risks, is flexibly reviewing a well-balanced portfolio by using a wide range of network as the financial environment changes.

These information materials are prepared based on the currently available information for us and described subject to our predictions and forecasts carried out at the time of preparation.
It must be noted that what is described therein does not guarantee our future business performance and carries certain risk of misjudgment or uncertainty.
Accordingly, you are kindly requested to bear in mind that there may be a possibility of sizable divergence between the actual business performance in ギャンブル サイトuture and that of our predictions or forecasts described therein.