GuruFocus - Release Date: November 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sompo Holdings Inc (NHOLF) reported an increase in adjusted consolidated profit by JPY22.3 billion to JPY155.6 billion, driven by growth in the overseas business.
- The full-year earnings forecast for 2024 has been revised upward by JPY15 billion to JPY270 billion, indicating strong financial performance expectations.
- The company announced a significant share buyback of JPY155 billion, contributing to a total shareholder return of JPY209.4 billion.
- Sompo Holdings Inc (NHOLF) achieved a reduction in strategically held shares by JPY197.8 billion, nearly reaching the initial target of JPY200 billion.
- The annual dividend is expected to increase from JPY12 to JPY32, with a full-year dividend of JPY132 per share, reflecting a commitment to returning value to shareholders.
- The domestic P&C business faced a negative impact of JPY12.5 billion due to a rise in accident rates and unit repair costs for auto insurance.
- The North American business experienced a downward revision in underwriting income due to multiple large claim incidents and higher-than-expected natural catastrophe losses.
- The pace of growth investment is not keeping up with the sales of strategically held shares, indicating a potential imbalance in capital allocation.
- The company faces challenges in maintaining the rate increase for the property business, which was lower than expected, impacting underwriting income.
- The ESR (Economic Solvency Ratio) remains above the target threshold of 250%, indicating potential capital inefficiencies that may require further adjustments.
A: The CFO explained that the decision was based on three layers for share buybacks: basic return, sales gain on strategic stock holdings, and capital adjustment. Despite not revising up adjusted profit significantly, they raised the DPS by JPY20, using 50% of the sales gain from stock sales. This decision was made after discussions with investors, balancing sustainability and shareholder preferences.
Q: Can you explain the factors behind the downward revision in the North American business and global market segments?
A: The CEO noted that the revision was due to market and rate environment adjustments, large claim incidents, and natural catastrophe losses. The North American market saw higher-than-expected NIA losses, and the property business had lower rate increases than anticipated, leading to increased reinsurance and a negative impact on underwriting income.
Q: What is the impact of the partial divestment of Palantir (NYSE:PLTR) shares on shareholder return and ESR?
A: The CFO stated that the partial divestment of Palantir shares impacted the ESR by about four points. The capital adjustment focused on ESR, and the return was made within the overall adjustment, not based on a specific percentage of sales proceeds.
Q: Will the pace of selling strategically held shares continue at JPY400 billion per year in the future?
A: The CFO mentioned that while they started with a target of JPY200 billion, achieving JPY400 billion this year was due to favorable market conditions and issuer negotiations. They have not finalized plans for the next fiscal year but aim not to downsize the reduction plan.
Q: How should we assess the ESR figures and potential capital adjustments going forward?
A: The CFO clarified that the current ESR figures include announced measures, and future capital adjustments will depend on profit deviations, strategic stock sales, and investment pipeline opportunities. They aim to maintain a balance between growth investment and shareholder return, with a focus on achieving the ROA target for 2026.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.