MS& Insurance : Handouts "Initiatives for Profit Improvement in Fire Insurance"

FY 2022 IR Day

Initiatives for Profit Improvement in Fire Insurance

MS & AD Insurance Group Holdings, Inc.

Yuji Arakawa, Executive Director

Tuesday, October 4, 2022

First Quarter result and Full Year Outlook for Fiscal 2022 (UnderwritingProfit)

• Underwriting profit of domestic non-life insurance(before catastrophe reserve) was decreased by 85.6 billion yen due to (1)loss increase of voluntary automobile insurance compared with FY2021(less accidents following to COVID19) (2)Hail impact of 1st Q while natural catastrophes did not tend to occur.
• EI loss ratio(excluding the impact of natural catastrophes) increased compared with FY2019, but has been in line with the annual forecast.
• The increase(+4.7pp) of EI loss ratio (Casualty and inland transit) was mainly due to foreign currency exchange impact(approx. 5.5pp)

Underwriting profit of two major domestic non life insurance

（￥bn）

【Factor of incurred loss increase】

Simple sum

（￥bn）

YoY

Loss Increase in voluntary

19.4

Net premium *1

713.9

1.4

automobile insurance

Natural catastrophes(hail in

38.4

Earned Premium written※2、※3

640.0

9.5

June) in Japan

Incurred loss(incl. loss adjustment expenses)※2 （－）

434.7

91.9

Foreign currency exchange

19.2

Expenses and others※2

（－）

231.1

4.1

Underwriting profit/loss prior to reflecting

-5.9

-85.6

Total(including the other factor)

91.9

catastrophe reserve

*1:

All lines *2 Excluding residential EQ and CALI(compulsory auto liability insurance)

*3: "Earned premiums" are calculated with adjustments including unearned premiums

【EI Loss ratio outlook for FY2022】

(excl. natural catastrophe policy reserves) and reserve funds

EI loss ratio of voluntary auto insurance(incl. loss adjustment

Simple sum

expenses)

YoY

（MS・AD Simple sum)

62.8% excｌ

. natural

catastrophes(hail

Fire and allied

68.0%

-12.5pp

in June) impact

Marine

51.0%

-11.8pp

54.8%

Personal Accident

55.5%

0.7pp

56.3%

Voluntary Automobile

60.1%

3.2pp

50.7%

Other

58.9%

-0.3pp

47.1%

Total(exc. CALI and residential EQ)

60.7%

-0.6pp

FY2019

FY2020

FY2021

FY2022

(excl. natural catastrophes impact)

57.5%

-0.8pp

Q1

Q1

Q1

Q1

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First Quarter result and Full Year Outlook for FY 2022 (Impact of Natural Catastrophes)

• The hails losses in June relatively high because the hail loss occurred in the area where MS&AD has kept high market share and channel. Following to this hail losses, the incurred loss against natural catastophes budget shows high progress but with the reinsurance recovey, the volatility full year profit will be curbed.

Status of Domestic Natural Catastrophe Losses in the First Quarter

		Incurred Loss			Incurred Loss （￥bn）
	FY2021	FY2022			Annual
	1st Q	1st Q	YOY		Outlook
Mitsui Sumitomo Insurance	0.1	19.3	19.2	40.0
Aioi Nissay Dowa Insurance	0.0	19.2	19.2	32.5
Total	0.1	38.5	38.4		72.5

*Fire (excluding earthquakes) EI combined ratio 137.9% (2021 1st Q: 106.7%). Simple sum of the non-consolidated figures of MSI and ADI.

Annual aggeregate ELC cover image

			・・・		Accumulated loss
	Accumulated lloss ELC *					ELC *
		Accumulated loss
accumulated loss	1st accident				XXth accident
	ELC *
(per accident)					holding
		2nd accident
	holding
		holding

		Annual Aggregated loss ELC *	Curbing the volatility of the
Annual	Control of annual
	balance due to the impact of
Aggregated loss	profit/loss balance
		Retention	natural catastrophes

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Social mission of fire insurance and Current Progress of initiatives for profit improvement

Social mission of fire insurance

• As a safety function indispensable to society, it will provide security and safety in a permanent manner.
• Protect all people in the mother market from intensifying and frequent natural disasters.

Results of initiatives for profit improvement in fire insurance

• Efforts to improve profitability, including insurance premium rate revisions, have made steady progress toward eliminating the deficit in underwriting profits.We expect to gain the profit in the mid-term management plan period.
• The profit improvement initiatives such as reduction of the maximum insurance period (maximum 5 years) in October 2022 accelerated the effectiveness of the initiatives.The risk portfolio has improved significantly.

Ongoing issues

• Following the return of insurance underwriting profits, we will continue initiatives toward VA positive.

Major initiatives

・Eradication of fraudulent insurance claims by specified business operators.

・Strengthen the support for loss prevention and mitigation measures through the use of digital technology (RisTech, cmap, etc.).

・Continued efforts such as segmenting the insurance premium rate of flooding considering the discussion in the meeting of experts.

3

Forecast of fire insurance profitability plan

Forecast of domestic fire insurance underwriting profit

(prior to reflecting catastrophe reserve) *

Plan to break even in FY 2023 and return profitability after FY 2024

（￥bn）

50

	9.0	17.0
0.0

0

-50	-36.8
-66.7
-100					(Fiscal
2021	2022	2023	2024	2025
Result	Plan	Outlook	Outlook	Outlook	year)

• Simple sum of the non-consolidated figures of MSI and ADI

(Management accounting basis. Excluding foreign fire class such as head office reinsurance).

4