Tokio Marine Holdings (8766) FY2026 FY Earnings Report

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Executive Summary

For the current period, increased profit in the Overseas Insurance Business was insufficient to offset lower profits in the Domestic Non-Life Insurance and Domestic Life Insurance businesses, resulting in higher revenue but lower profit. Consolidated ordinary revenues were ¥8,872.3B (up +5.1% YoY), while ordinary income was ¥1,348.6B (down △7.6% YoY) and net income attributable to owners of the parent was ¥980.4B (down △7.1% YoY). Consolidated net income, including non-controlling interests, was ¥987.5B (down △6.3% YoY). The primary factors behind the decline in profit were deteriorating profitability in the Domestic Non-Life Insurance Business and a substantial decline in profit in the Domestic Life Insurance Business, while higher revenue and profit in the Overseas Insurance Business provided support.

Factors Affecting Performance

【Revenue】Consolidated ordinary revenues increased by +5.1% YoY to ¥8,872.3B. By segment, the Overseas Insurance Business was the largest and fastest-growing business, with revenue of ¥4,595.1B (51.8% of the total, +6.7% YoY). The Domestic Non-Life Insurance Business recorded lower revenue of ¥3,772.9B (42.5% of the total, △2.5% YoY), while the Domestic Life Insurance Business posted substantial revenue growth to ¥795.8B (9.0% of the total, +24.5% YoY). The Solutions and Other Business expanded sharply to ¥257.7B (+214.5% YoY), although it remains small in scale.

【Profit and Loss】Ordinary income was ¥1,348.6B (△7.6% YoY), profit before tax was ¥1,335.0B (△8.0%), and net income attributable to owners of the parent was ¥980.4B (△7.1%). Segment profit in the Domestic Non-Life Insurance Business declined to ¥744.5B (△16.7%, profit margin 19.7%), while the Domestic Life Insurance Business also recorded a sharp decline to ¥23.6B (△66.3%, profit margin 3.0%). In contrast, the Overseas Insurance Business achieved profit growth exceeding revenue growth, with profit of ¥559.1B (+14.4%, profit margin 12.2%). Extraordinary losses were limited to ¥21.6B, including impairment losses of ¥4.0B, and the difference between ordinary income and net income was primarily attributable to income taxes and other taxes of ¥347.5B (effective tax rate 26.0%). In conclusion, the current period resulted in higher revenue but lower profit.

Segment Analysis

The Domestic Non-Life Insurance Business is the largest segment, accounting for 42.5% of revenue, but revenue declined by △2.5% YoY and segment profit fell by △16.7%, with the profit margin also declining to 19.7%, making it a drag on Group profit. Although revenue in the Domestic Life Insurance Business increased by +24.5% YoY, segment profit plunged to ¥23.6B (△66.3%), reducing the profit margin to 3.0%. The significant deterioration in the conversion of revenue growth into profit warrants attention. The Overseas Insurance Business recorded revenue of ¥4,595.1B (51.8% of the total, +6.7% YoY) and profit of ¥559.1B (+14.4%, profit margin 12.2%), demonstrating profit growth exceeding its revenue growth and becoming the largest growth driver, accounting for approximately 41% of Group profit. The Solutions and Other Business expanded rapidly, with revenue of ¥257.7B (+214.5%) and profit of ¥21.4B (+166.7%), although its scale remains limited within the Group.

Key Financial Indicators

【Profitability】The ordinary income margin was 15.2% (17.3% in the previous year), while the net income attributable to owners of the parent margin was 11.1% (12.5% in the previous year); both declined from the previous year. ROE was 18.1% and remained high against the backdrop of substantial financial leverage, including insurance liabilities, with total assets to net assets at approximately 5.86x. However, the decline in the net profit margin was a factor weighing on ROE.【Cash Flow Quality】Operating cash flow (OCF) was ¥584.3B, representing only approximately 0.60x net income attributable to owners of the parent of ¥980.4B, and declined by 56.6% from the previous year's OCF of ¥1,345.1B. The pace of earnings conversion into cash weakened from the previous year.【Investment Efficiency】Capital expenditures were ¥45.0B and depreciation and amortization was ¥162.0B, resulting in capital expenditures/depreciation and amortization of 0.28x, a low level indicating restrained investment. Equity in earnings of affiliates accounted for under the equity method was ¥10.8B, making a limited contribution to net income.【Financial Soundness】The equity ratio improved to 17.1% from 16.3% in the previous year. Insurance contract liabilities and policy reserves totaled ¥23,263.9B, accounting for 72.8% of total assets, making duration management of assets and liabilities central to financial stability. Goodwill was ¥357.0B, equivalent to only 6.5% of net assets, indicating that the capital burden from M&A remains limited.

Cash Flow Analysis

Cash flow from operating activities was ¥584.3B, down 56.6% from ¥1,345.1B in the previous year. Cash flow from investing activities was an inflow of ¥639.7B, supported by the collection of securities and loans receivable, among other factors. Cash flow from financing activities was an outflow of ¥624.3B, primarily due to share buybacks of ¥251.6B and dividend payments of ¥375.8B. Reported free cash flow, calculated as the sum of OCF and investing cash flow, was positive at ¥1,224.0B. However, simplified free cash flow, calculated using OCF after deducting capital expenditures, was only approximately ¥539.3B, below the combined shareholder returns of ¥664.1B through dividends and share buybacks. Total shareholder returns during the current period depended to a certain extent on cash inflows from investing activities. Monitoring over multiple periods would be useful in assessing the Company's sustainable capacity to fund shareholder returns from OCF alone.

Earnings Quality

Extraordinary items during the current period were small, comprising extraordinary income of ¥8.0B and extraordinary losses of ¥21.6B, including impairment losses of ¥4.0B. The difference between ordinary income and net income attributable to owners of the parent was primarily attributable to income taxes and other taxes of ¥347.5B (effective tax rate 26.0%), with limited indications of a temporary nature. In non-operating and investment-related items, interest and dividend income amounted to ¥991.1B, while securities sale gains of ¥713.3B were accompanied by securities sale losses of ¥471.8B, reflecting earnings fluctuations associated with portfolio turnover. Comprehensive income was ¥962.1B, close to net income attributable to owners of the parent of ¥980.4B, although foreign currency translation adjustments of △¥30.9B slightly reduced comprehensive income. While OCF was low at approximately 0.60x net income attributable to owners of the parent, indicating a certain divergence between accrual-based earnings and cash flows, caution is warranted against excessively discounting earnings quality based solely on a single year's figures, as the results incorporate industry-specific factors such as changes in insurance contract liabilities, policy reserves, and investment assets.

Earnings Forecast and Guidance

For the next period (the fiscal year ending March 2027), the Company's forecast calls for net income attributable to owners of the parent of ¥830.0B, basic earnings per share of ¥441.83, and annual dividends of ¥245.00 per share. The Company forecasts an approximately 15.3% decline in profit from current-period actual net income attributable to owners of the parent of ¥980.4B, while indicating a policy of increasing dividends to ¥245.0 per share from the current-period dividend of ¥218.0. The payout ratio based on forecast net income is expected to be approximately 55.5%, up from the current-period actual payout ratio of 42.3%.

Shareholder Returns

The annual dividend for the current period was ¥218.0 per share, comprising a year-end dividend of ¥112.5 and an interim dividend of ¥105.5. Total dividends were approximately ¥412.5B, representing a payout ratio of 42.3% against net income attributable to owners of the parent of ¥980.4B. Share buybacks of ¥251.6B were conducted, bringing total shareholder returns, including dividends, to approximately ¥664.1B and the total return ratio to approximately 67.7%. Total shareholder returns were not excessive relative to current-period profit, but exceeded simplified free cash flow based on OCF of approximately ¥539.3B, meaning that part of the funding for shareholder returns depended on cash inflows from investing activities. For the next period, the Company plans to increase the annual dividend to ¥245.0 per share, indicating a policy of dividend growth.

Risk Factors

1. Deteriorating profitability in the Domestic Non-Life Insurance Business: Segment profit declined by △16.7% YoY, and the profit margin fell to 19.7%. Trends in natural catastrophe losses, repair costs, and reinsurance costs will be key to the recovery of profitability.

2. Margin deterioration in the Domestic Life Insurance Business: Despite revenue growth of +24.5% YoY, segment profit plunged by △66.3%, reducing the profit margin to 3.0%. Close attention is required to whether margin compression caused by changes in product mix, policy reserves, and operating expenses will continue.

3. Weak operating cash flow: OCF was only approximately 0.60x net income attributable to owners of the parent and declined by 56.6% from the previous year. Although caution is warranted in evaluating a single period because the figure includes changes in insurance liabilities and investment assets, recovery over multiple periods needs to be confirmed.

Industry Benchmark (For Reference; Compiled by the Company)

Return on equity is below the industry median.
※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The Overseas Insurance Business achieved profit growth of +14.4% YoY, exceeding revenue growth of +6.7% YoY, and accounted for approximately 41% of Group profit, making it a diversified growth driver. This was a defining feature of the current-period results.

2. Lower profit in the Domestic Non-Life Insurance and Domestic Life Insurance businesses was the primary cause of the decline in consolidated profit, indicating that profitability improvements in these two domestic businesses will determine future trends in consolidated earnings.

3. Although OCF was only approximately 0.60x net income attributable to owners of the parent, shareholder returns themselves remained within a manageable range relative to current-period profit, with a payout ratio of 42.3% and a total return ratio of 67.7%. The Company plans to increase the dividend to ¥245.0 per share in the next period.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not constitute a recommendation to invest in any particular security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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