Earnings Transcript for 8766.T - Q3 Fiscal Year 2021

Taizou Ishiguro: Thank you, everyone, for gathering here today despite it's late in the evening here in Japan and at the busy time of the year with many earnings announcement colliding in a day. Ishiguro from the IR team of Tokio Marine Holdings. I would now like to begin the telephone conference on Tokio Marine Holdings Fiscal 2021 Third Quarter Results and Revision of Full Year Projections that was announced today. We are going to be proceeding in a following manner. Our Group CFO, Mr. Yuasa, will be giving a brief presentation on the highlights of today's announcement using the material posted on our website. After that, we will receive questions from the participants. Before starting this conference call, I have a disclaimer to make. What we are about to present, we may include business projections and forecast based on information and assumptions available today. These projections and forecasts include risks and uncertainties. Please note that actual results may differ from such projections and forecasts. This conference is provided with a recording service. Now let us begin. Mr. Yuasa, the floor is yours.

Takayuki Yuasa: My name is Yuasa Group CFO of Tokio Marine Holdings. I thank all of the participants for joining us tonight despite this late in the day. Thank you for your interest in Tokio Marine. Today, Tokio Marine announced its third quarter results and upward revision to full year projections, so I am going to be explaining about that first. Without further ado, please turn to Page 3. I have two points I would like to convey to you today. The first point is that third quarter earnings was very strong. Adjusted net income for the third quarter was ¥472.9 billion. This is a progress rate of 96.5% against the annual projection announced back in November last year. Therefore, I believe it is fair to conclude that current business performance is robust. The second point is that based on the strong third quarter results and strong business momentum, we are making an upward revision to full year projections. Specifically, full year guidance of adjusted net income will be revised upwards by ¥70 billion from ¥490 billion announced in November to ¥560 billion this time. Now, I will give more details on both of these two points. Please turn to Page 4. First, I will talk about top line. Third quarter results, our net premiums written excluding FX impact, increased by 4.9% year-on-year. And life insurance premiums increased by 0.5% year-on-year. Both these are making good progress against our annual projections and performance is strong. Backed up by strong performance of overseas businesses, annual projection of net premiums written was also revised upwards and it is now positive 4.2% growth year-on-year. Next, I will talk about adjusted net income. Please turn to Page 5. Third quarter result was strong, as I touched upon earlier and this is mainly driven by TMNF and international business. To be more specific, at TMNF, in addition to the strong top line results, incurred losses declined significantly from the November projection. This is due to decrease in natural catastrophes and large losses compared to a normal year and decrease in traffic volume due to COVID-19, which has mitigated loss ratio in the auto line of business. As a result, we already exceeded the full year forecast by 6.5% as of the end of the third quarter. In the international business, while we were somewhat conservative and not judging for nat-cat losses in our November forecast, with strong underwriting profit investment income, we achieved a strong progress rate against the full year forecast at 92.4%. Based on these results, we made an upward revision to our full year guidance, which I would like to discuss on Page 6. As I mentioned earlier, we revised up the full year projection for adjusted net income by ¥70 billion. First, TMNF is revised up by ¥20 billion. This is because we released ¥15 billion from the natural catastrophe budget to make the full year budget ¥40 billion before tax. Also, based on the recent actual results, we reviewed net premiums earned. Next, international business is revised up by ¥45 billion. As the accounting period for the international business ends in December, we reflected the most recent results to the extent that we know. To be more specific, as shown on the slide, underwriting results were strong, partly helped by benign nat-cat losses. On the investment front, those capital and income gains increased and currencies worked favorably with weaker Japanese yen. Also other profit is revised up by ¥5 billion. This is because sales volume of business related equities is expected to increase by ¥10 billion. All-in-all, adjusted net income is projected at ¥560 billion. You might rather be interested in underlying level of income as a basis to estimate FY 2022 performance. Certainly, the projected ¥560 billion includes some one-off factors, such as benign nat-cat losses and capital gains in North America by approximately ¥20 billion each or ¥40 billion in total. In addition, while we haven't done detailed calculations, we also assume that mitigated loss ratio under the pandemic is helping our income by about ¥10 billion. And while this may not sound new, sales volume of business-related equities has been exceeding our original plan. In terms of our underlying performance, management team appreciates that we are capable of exceeding ¥500 billion. I'd like to finish off my remarks with some comment on capital management, although there is no slide prepared. Last December, we announced share repurchase of ¥30 billion. As of the end of January, we implemented the plan by ¥20 billion, which made our total repurchase at ¥80 million so far in FY 2021 on a cumulative basis. Our stock price is now exceeding ¥7,000 with a market cap of approximately ¥5 trillion. But as I discussed earlier, given our underlying capabilities, we think our stock is still undervalued. So, as for the remaining ¥20 billion in the share repurchase program, we intend to make flexible decisions and execute the program. We will continue to implement our management and business strategies steadily and along with disciplined capital management, we strive to increase profit and ROE. We would like to continue to meet the expectations of capital market and I would like to ask for your continued support. Thank you very much for your kind attention.

Taizou Ishiguro: Thank you, Mr. Yuasa. Now the [indiscernible] is explaining how to ask a question to the Japanese participants. Please wait until the first question comes out.

Operator: Now, we will begin the Q&A. First question, SMBC Nikko, Mr. Muraki. Please ask your question.

Masao Muraki: My name is Muraki from SMBC Nikko Securities. First, I have a question about the international. Second is about the fire in domestic P&C. The first question, this is not about you, excuse me, but the peers due to social inflation, due to inflation of the goods and services, there has been some impact to their financial earnings, but the Tokio Marine, to your international businesses, especially in the US, after reviewing the reserve at the end of last year, I believe that you have released your reserve for the US business. I think this is a written on Page 25. This is the reversal of the reserve. And against the inflation, how did you evaluate the inflation that's taking place? And also, this is not directly related to inflation, but credit spread is widening. And so, this current level, the sensitivity that you announced and the credit spread is one of that. According to that, I'm sure there is some gap in the financial years. But as of the end of the September, comparing to that timing, how many basis points have you seen the widening of the credit spread? And therefore, that's my interest rate inflation and credit spread related question. That's my first question. And then the second question is about improving the profitability of your fire insurance, you made some progress in the first half compared to your plan. But then after that, how much progress have you made? And also, any update on the pricing for your fire line of insurance going forward?

Takayuki Yuasa: Okay. So, on the first question, we will have, Nagano-san from International Business Development Department answer your question.

Tsuyoshi Nagano: My name is Nagano. About the inflation and the releasing of the reserve question, I'd like to give you some explanation. So, as you questioned, right now in the United States, there is inflation taking place. And also, as for social inflation under the pandemic situation, due to the closure of court houses, et cetera, temporarily, it has been very quiet as you might know. And for the economic inflation that's taken place, there is a rise in the claims loss was and also a rise in the labor costs, et cetera, and it is starting to make some impact to our earnings. However, in reality, we have not really seen any material impact yet, but I think it's going to be in the future that we will see such impact. And the loss cost rise that we might expect. We are trying to do the rate increases over and above the expected loss cost increase and we continue to do that, and therefore we hope to absorb any impact within the rate increase that we achieve. On the other hand, that's for social inflation, right now, it's become quite pacified. But going forward, it could be surged again and we are always conscious of the possibility of this resurging. So, sometime down in the future, to prepare for potential loss cost to rise, we are revisiting the reserve. And when we do that, we try to have a conservative stance in evaluating the level of the reserve. That concludes my answer to your question.

Taizou Ishiguro: On the first point, this is Ishiguro speaking. About your credit spread question. The credit spreads that we are looking at by the end of September last year, it was about mid-80-basis point mark. So, it was something like 84%. And then as of last week, I believe it was over 100 basis points; and so it has widened by about 20 basis points, and that's what we observed in terms of credit spreads. To your second question, we would like to have [indiscernible] san from the corporate accounting answer your question.

Unidentified Company Representative: My name is [indiscernible] from corporate accounting of Tokio Marine & Nichido about the profitability improvement of fire insurance, we did make some progress in the first half, and that progress continues on to the third quarter. And versus our expectations, we have seen a huge improvement. As for pricing of fire line of insurance, there is no more update that I need to make to you.

Masao Muraki: On your first point, just to confirm, the super long tail liability, I don't think your exposure is that large. However, this time, when you review the reserve at the end of the year, the property unit claims payment is rising and was that factored in when you revisited the reserve situation?

Tsuyoshi Nagano: This is Nagano again from the international business department. So regarding inflation, as I have mentioned, rate increase and other measures are taking place. And we are trying to mitigate the rise in the claims cost. Right now, we are not seeing much impact coming from inflation yet. But in the future, to prepare for potential stronger inflation, we are reviewing the reserve situation with a conservative stance. That concludes my answer. Thank you very much.

Operator: Thank you very much for the question. The next questions are from Ms. Tsujino from MUFJ Morgan Stanley Securities.

Natsumu Tsujino: Thank you very much for this opportunity. Now this time around, in the international business, net income is revised up by ¥45 billion. What is the breakdown of that revision? Maybe the rough breakdown is good, but that is my first question. And also at TMNF, the upward revision is by ¥25 billion. Nat-cat is expected to decrease compared to the original plan. And also, in the fire line of business, there hasn't really been any major claims being incurred. So, this year -- well, last year, the losses were pretty high. And so were you becoming more conservative in budgeting for this fiscal year or is this something that we actually do need to be more conservative as we look ahead at the next fiscal year onward? And secondly, over in the United States, the short-term interest rates are now creeping up. And what is the impact of that rate increase to you?

Taizou Ishiguro: Thank you very much, Ms. Tsujino. On the first question, on the international side, I'd like to ask Mr. Nagano from International Business Development Department and to answer the question. And [indiscernible] from corporate accounting department, is going to talk about the domestic side.

Tsuyoshi Nagano: And my name is, first of all, Nagano from International Business Development Department. On your first question related to the international business. Now this time around, we made upward revision and what is the breakdown of that? That is I understand your question. I'm sorry. However, we are not able to share with you specific breakdown of the detail by group company. Now, when it comes to underwriting profit and investment income and the breakdown in between the two, that is actually shown on Slide 6. Just roughly speaking, as shown here, the underwriting piece written here is about ¥5 billion, excluding the impact of the nat-cat. Now there are two specific factors here such as profit growth from premium increase as well as takedowns of past reserve and the contribution is almost half and half in between the two and also ¥24 billion increase related to investment and others. And out of this, as for the increased income gains, if you could perhaps first will deduct ¥7 billion which is the increase of the capital gains from ¥24 billion. Half of that remaining piece is related to the increase in income gains. And, of course, other factors are explained by -- other part is explained by other factors, but that is the rough breakdown of what's happening on the international side.

Natsumu Tsujino: So, ¥7 billion up based on increasing capital gains. And you're saying that this year has been good. So consistently, capital gain has been a consistent favorable factor. And in particular, this year, you are expecting additional ¥7 billion contribution from capital gains. So that means that next year onward, this piece contribution is going to decline quite significantly. Is my understanding correct?

Taizou Ishiguro: This is Ishiguro speaking. On Slide 6 at the very bottom there are some remarks written here. As for ¥12 billion capital gains in North America, this was already revised upwardly as of the end of the second quarter already. In addition to that, we are making additional ¥7 billion upward increase. And therefore, all-in-all, it is ¥19 billion increase, and this is partly because of the fair value to PL.

Natsumu Tsujino: I see.

Unidentified Company Representative: My name is [indiscernible] from corporate accounting department of TMNF. Now, on the fire side. Now, first of all, on a year-on-year basis, as for the third quarter, the claim -- large-scale the claims got reduced, so was it rather uninflated year last year? Well, we normally assume that a certain level of losses are to be incurred by large-scale accidents every year. So, it wasn't necessarily a very bad year next year. However, and as we budget for a year, we would essentially expect for an average level of the losses related to the large-scale losses. And we don't necessarily think that the trend that we are seeing this year is going to be repeated next year. And therefore, it would essentially go back to an average level of the losses that we should be assuming for next year.

Natsumu Tsujino: So that means that on a full year basis, you are expecting some losses to be incurred?

Unidentified Company Representative: That is correct. We're expecting some losses to be incurred during the remaining three quarters. So in addition, other than a decrease of the natural catastrophes. As for the factors which has led to the upward provision at TMNF would have been more favorable than the initial plan.

Natsumu Tsujino: In the automotive line of business, I believe that has -- the favorable result has essentially been canceled off on the consolidated basis. So, what are the other factors which has led to the upward revision?

Takayuki Yuasa: Now, essentially, it is ¥11 billion related to decrease in natural disasters and ¥9 billion increase in net premiums earned and ¥5 billion due to the increased sales of the business related equities.

Natsumu Tsujino: I see.

Unidentified Company Representative: Let me answer the second question. My name is [indiscernible]. As for the impact of the rise in rates in the United States, on the investment front, of course, the rates are now going up in the United States. And therefore, primarily in Delphi, we certainly are feeling the impact. However, the basic assumption is that, of course, based on the liabilities that we have, we have been implementing ALM. And therefore on an economic value basis, we have been controlling the risk well vis-à-vis the interest rate. And therefore, we are actually less sensitive to the actual interest rate movement. Now on the day GAAP basis, with the rise of the rate, there could be some impact that we might actually feel in actual numbers. However, as long as the rates are actually going up gradually, because they are actually on holding bonds, we should be able to absorb the impact to some extent. And, of course, on the other hand, depending on the rate how quickly the rate is actually going up or if the inflationary situation is going to become stronger and also stay. And if the situation is going to become more drastic to see more [indiscernible] situation, then against the assets that we actually do hold as well, we probably would start feeling some impact. I mean certainly, therefore, are monitoring what is really happening in the market closely and we will continue to do so to see how that could potentially affect our portfolio. Thank you.

Operator: Thank you very much. So next question, this is going to be from Daiwa, Mr. Watanabe [ph], please.

Unidentified Analyst: Hello. My name is Watanabe from Daiwa [ph]. I have two questions. The first question is about adjusted net income -- your underlying adjusted net income. You said that it's going to exceed ¥500 billion. And at the mid-term announcement, on an adjusted basis, it's going to be ¥470 billion, to ¥490 billion. That was our projection. Compared to that, there is an upward revision by over ¥30 billion of upside. And for next year, your adjusted net income guidance is going to be exceeding ¥500 billion when you announced your next year's guidance? The second question about the ESRs interest sensitivity. You have been disclosing your sensitivity to ESR and it was supposed to be neutral. However, there is a parallel shift. So, for the domestic interest rate, when it progresses, when it becomes steep, it might have more impact to your ESR sensitivity. Wouldn't that happen to your ESR? Thank you.

Taizou Ishiguro: So on your first question about our underlying adjusted net income, Yuasa-san, can you please answer his question?

Takayuki Yuasa: This is Yuasa speaking. So, now I'm going to be answering your first question. The difference that you mentioned, so it has increased by about ¥30 billion compared to what we had said. However, as of the third quarter, because we made the progress by one quarter. As of the mid-term, there were some conservatism, but then we are realizing some of those conservatism. And that is the reason for making the progress in that one quarter, and therefore we have seen some upside to the adjusted net income towards the next fiscal year, of course, we have not announced our guidance for next fiscal year. I cannot say anything clear today. But based on the underlying earnings this time, we want to continue to keep with a similar momentum. And so we will be aiming to keep that momentum and then that will serve as the basis of next year's guidance. Thank you. Regarding the ESR sensitivity, [indiscernible] from Corporate Planning, will answer.

Unidentified Company Representative: My name is [indiscernible] from Corporate Planning of Tokio Marine Holdings. Regarding the ESR sensitivity, this is based on the parallel shift and that is how we create the sensitivity. However, due to the change of the curve, do we get any impact? And so on our liability, the length, the duration of the liability, et cetera, if there's any movement outside of the parallel shift, it could create some other impact. But right now, as far as what we disclosed, the ESR that we disclosed today, this is after deducting the restricted capital. And, therefore, there should not be much impact coming from those factors. That concludes my answer to your question.

Unidentified Analyst: Thank you very much.

Operator: Thank you very much. Next question is from Mr. Otsuka from JPMorgan.

Wataru Otsuka: This is Otsuka speaking from JPMorgan. Thank you very much. My first question is rather a basic question if I may. Nat-cat budget. You made the revision this time around. But, ultimately, given your portfolio or the reinsurance program, how much is the fair level of the nat-cat budget that you should be assuming? The incurred losses related to natural catastrophe has become lower. And therefore, I can understand that you are making the revision. However, you initially expected ¥74 billion, which is now down to ¥43 billion. As a result of that, you are now making the upward revision. So next year, for example, for the next several years or so, as we look ahead to the future, as someone who is looking at your company from an external perspective, what is the basic level that we should be assuming or should we consider ¥43 billion or ¥74 billion to be the basic level? I think they have been consistently at around ¥50 billion international -- in the international business. However, when it comes to domestic business on a normalized basis, what is the nat-cat level that we should be assuming in a normal year? That is my first question. And secondly, to the extent that you can respond, I'd like to ask this question. Primarily to Mr. Yuasa, but related to capital management, particularly share repurchase in and after next fiscal year, what should we assume? As of the end of the second quarter, I think you mentioned that you are still considering internally. However, based on further discussions that you have had perhaps with some external people as well, any particular progress or update that you can share with us on this front?

Taizou Ishiguro: [Indiscernible] is going to answer the first question related to nat-cat.

Unidentified Company Representative: As for domestic nat-cat, I'd like to respond to your question, first of all. Of course, depending on the actual occurrence of the nat-cat, the impact could be significant. And with that said, as far as fiscal year is concerned, it has been a benign year in terms of the nat-cat. And so compared to the initial budget, the actual losses incurred has become smaller. Now as for next fiscal year, in terms of the nat-cat budget that we should be assuming, given our portfolio that we have as well as other factors, of course, we will be reviewing the number once again. However, we should be essentially assuming the level that we have initially assumed for this fiscal year fiscal year as well.

Taizou Ishiguro: The second question, Mr. Yuasa, please.

Takayuki Yuasa: Yes, this is Yuasa speaking. Now since we spoke last time, of course, we have had some conversations with investors in which we have actually received many inputs. Now as of November, ¥100 billion minus X, we decided that we would abandoned this some X factor. And also, we essentially decided that we would abolish this framework. And we also mentioned that we will continue to be flexible in the share repurchase program. And this is exactly what we are actually continuing to study internally, and therefore, we have come to any conclusion just yet. And it is just really a matter of how we want to do this. When it comes to the capital level adjustment and its basic thinking, we would like to continue to base it for the ESR, and we would like to continue to be flexible by monitoring various factors in a flexible manner, we would like to make [indiscernible]. So, this would essentially remain unchanged. And as for specific sort of tactics as to how we want to do it, we intend to share with you more on this front in May this year.

Wataru Otsuka: I see. Sorry to be repetitive. However, related to the first question, you mentioned that we should be assuming the level that you initially assumed for the fiscal year, but ¥74 billion or ¥43 billion.

Takayuki Yuasa: I meant to say initial expectation.

Wataru Otsuka: I see, so initial budget that you expected for this fiscal year [indiscernible] next year.

Takayuki Yuasa: That's correct.

Wataru Otsuka: Thank you.

Operator: Next from Mizuho Securities, Sato-san please ask your question.

Koki Sato: Hello. My name is Sato from Mizuho. I have one major question, which is dividend. Your philosophy for dividend payment and also five-year average of the adjusted net income to serve as the basis of calculation. Would you still keep out the formula? As for dividend payment as of November, the total dividend payment is going to be 47% payout, which is ¥168 billion, but now that you are making it up for the revision. If you do the same math, I think the dividend amount is going to become less than 45%. And two years later, you're aiming to achieve a 50% payout. And so in relationship to that goal, would you plan on raising your dividend amount? That's my first question. The second question; your earnings capability has been enhanced recently. And so, your average adjusted net income and also single-year adjusted net income, there is a larger deviation between the two, but still would you still be relying on the five-year average of the adjusted net income in calculating the dividend amount or maybe you will -- when you do the capital adjustment, maybe you refer to this adjusted net income average. But I'm talking about this deviation between your adjusted net income average versus the single year adjusted net income. And when the deviation becomes larger, what would you do? Thank you.

Taizou Ishiguro: So, the first point of our dividend payment, Mr. Yuasa, can you please answer his questions?

Takayuki Yuasa: This is Yuasa speaking. First, the possibility of raising dividend was your question. On that point, we have to look at the actual track record and decide. But basically, when we talk about the payout ratio, we think about it based on the initial original projection at the beginning of the year. And so just because on a single year basis, this year happened to be good, but then we calculated on the five-year average earnings. And so, it's only the impacted by one-fifth [ph]. And so at this point in time, we really cannot say anything about how much dividend we will pay actually. And also taking the five-year average versus the single year earnings and the difference between the two, this year we have some one-off factors included in this year. And it's a P&C business. And so we do have some one-off factors every year, which may push up the earnings or push down the earnings. And that is why we take the five-year average. So on this point, I believe that in order to achieve a stable dividend payment and also a stable increase of dividend, we do not plan on changing the calculation method of using the five-year average. Thank you.

Koki Sato: Thank you for your answer.

Operator: Thank you very much. Next, Mr. Sasaki from Bank of America.

Futoshi Sasaki: Yes. This is Sasaki speaking from Bank of America. I'd like to ask you two questions. Number one, related to shareholder return, how you intend to make the communication with the market going forward? As we explained before, although you sort of used the budget for the capital level adjustment, it seems that you are gearing toward abolishing that approach. Now, next year onward, I believe that you will continue to make decisions flexibly. But in terms of how you communicate that to the market, are you thinking of not giving any guidance beforehand? So, what is your thought on this? That is my first question. And second question, if I may. Now Credit Suisse Swiss Asset Management, with regard to the current debt -- insurance [ph] of Greensill, it seems that they are now starting to claim for the compensation. And I believe that there has been some press release made already. And it is my understanding that there is essentially no risk to your company. But what makes us believe that there is essentially no risk to you? And what is your essential thinking on those? The first question is related to the communication pertaining to shareholder return.

Taizou Ishiguro: Mr. Yuasa, please?

Takayuki Yuasa: Yes. On this particular point, we have been having dialogues with various investors, and we have been receiving various inputs. Now, we mentioned once before that we intend to abolish what we have introduced. However, when it comes to how we want to communicate with the market going forward. How can we make it easier to be understood in the eyes of the investors? We would like to further our discussions toward May.

Unidentified Company Representative: I see. With regards to the second question on Greensill, I'd like to answer the question from Mr. Ishiguro [ph]. Now this is related to a contract with a specific client, and so there isn't really much that I can share with you. However, since last year, Credit Suisse Asset Management and also according to the recent news release, there has no really new information in -- from our perspective. Since two years ago, we have been engaged in a very detailed investigation on this particular matter, and it is, again, our recognition that this issue is well under control. Now in March and also in June last year, the impact to our performance now and also next fiscal year was unassessed [ph], and we actually made it clear that there is no impact to our company's performance now and also from this point onward; and so this recognition remains unchanged. And if, of course, there are any changes in the situations, we certainly would like to let you know accordingly.

Futoshi Sasaki: So that means Credit Suisse -- as of the end of November, generally made a press release. And based on that press release, your recognition stays unchanged. Is my understanding correct?

Unidentified Company Representative: Mr. Sasaki, yes, your understanding is correct.

Futoshi Sasaki: I see -- it was clear. Thank you very much for the clarification.

Operator: Next from Citigroup, we have Mr. Niwa [ph].

Unidentified Analyst: Hello, my name is Niwa [ph] from Citigroup. Can you hear me?

Taizou Ishiguro: Yes.

Unidentified Analyst: I will continue now. And so first is regarding your guidance; the other one is not really about your financial earnings, but about the business investment. And so first, regarding your guidance; when you look back at this year, you had a lot of one-off factors, but then you made a major multiple series of upward revisions. And then talking about your underline earnings, it makes me think that you might also make a downward revision at the beginning of the year next year. So I just wanted to confirm that there is no inherent loss that you are hiding. And for next year, would you also have a conservative guidance? And then you will continue to make up for the revisions as the year goes by? And so I just want to make it clear on how you plan on communicating your guidance to investors. And also second question about the business investment. At the beginning of the year, it was said that you will be doing some bolt-on mid-to-small sized M&A, what was supposed to be the budget you had for this year? And how much did you spend for the past nine months? And you have invested in multiple fintech companies, including those fintech company investment, how much in total is your spend? And also, do they all contribute positively to your business?

Taizou Ishiguro: Thank you. And so on your first question about the guidance. Mr. Yuasa, can you please answer his question?

Takayuki Yuasa: This is Yuasa speaking. For the fourth quarter, the inherent loss that we may be -- if it's inherent, we cannot really tell you, but then we are not really expecting any major event happening as we speak today, as of today. And then about the guidance, how we treat guidance -- basically, it's not that we are intentionally being conservative, but it has happened to be this way this year. And so for next year in NAFTA, we will still try to do our best estimate and try to be -- try to make sure that our estimate is correct in accordance with the reality, and we will try to do that for next year. Thank you.

Taizou Ishiguro: Your second question about the business investment is going to be answered by myself, Ishiguro. So for the overseas bolt-on type of M&A, as you know, we have not made any news release this year on that. Therefore, it's ¥100 billion minus X and nothing is to be deducted from the ¥100 billion, so there is no export this year. And therefore, the fintech-related investment for digital investment that we have been making every year, we do make such investment. And at the [indiscernible] they have made multiple releases; there are multiple investment cases including DOC [ph], I believe they all contribute to your business, but there are not any major amount. If there is anything that was be to -- to be the X being subtracted from ¥100 billion, nothing of that size has occurred so far. Thank you.

Operator: Next, Mr. Okada [ph] from UBS.

Unidentified Analyst: This is Okada [ph] from UBS speaking. I just like to ask you one question related to rate increases in international business. HCC and fully [ph] I think, has continued to achieve a very strong performance in the third quarter as well. So from this point onwards, how they think that they can continue to implement rate increases going forward? Now since last year, it seems that in the U.S. overall in the commercial market, the rate increase has essentially peaked out. However, due to the inflationary situation, I believe that the environment is going to be more conducive perhaps for further rate increase but what is your assumption on this onwards [ph]?

Tsuyoshi Nagano: My name is Nakano from International Business Development Department of Holdings. As for the rate increase expectation from this point onward, of course, we need to continue to monitor the market situation and we need to respond to it in a flexible manner; that will continue to be the case. But generally speaking, of course, depending on the line of business, there are some differences. So if I may perhaps make a very generalized comment here, the hardening of the market, as you just rightly pointed out, due to the progress of the inflation is expected to here to stay for the foreseeable future, that is the consensus in the market. So in our company as well across many lines of business, we think that the environment will be conducive for the rate increase. However, as for how much we can actually increase the rate by; of course, it depends on the line of business. However, there are many lines of business where the magnitude of the rate increase is actually becoming smaller. And it is possible that we won't be able to achieve as significant rate increase as we have actually seen this year actually for next year onwards. So we will continue to look at the market overall trend as well as the situations related to the specific line of business. And while we believe that the hardening is here to stay, we believe that the rate -- the magnitude of the rate increase could somewhat slowdown.

Unidentified Analyst: Thank you.

Taizou Ishiguro: Do you have any other questions? If you have a question, please go through the process in asking your question; this is to the Japanese participants. No more questions. Although we have some time left, but since there is no more question from the Japanese participants, we would like to finish Q&A. And so this concludes the telephone conference on the Tokyo Marine Holdings fiscal 2021 third quarter earnings, and also revisions to the annual guidance. If you have any further questions, please do not hesitate to contact us later on. Thank you very much once again for your participation.