Tokio Marine Earnings: Strong Guidance on Accelerated Shareholding Reduction

Tokio Marine’s fiscal 2023 (ended March 2024) adjusted net profit of JPY 711.6 billion grew 60% from fiscal 2022, which was hit by losses related to covid-19 and natural catastrophes. This exceeded the company’s JPY 690 billion guidance by 3% on lower winter storm loss at Japan P&C and better-than-expected gains from shareholding reduction. The company introduced a new medium-term plan, targeting a 16% three-year earnings per share compound annual growth rate, driven by 15% and 1%-2% respective growth from adjusted net income and share buybacks, after considering capital gains from shareholding reduction, which is expected to boost growth by 8%. Thanks to strong earnings growth and share buybacks, we believe the company can achieve its adjusted return on equity target of over 20% to get on par with global peers starting in fiscal 2024. We believe the impact of accelerated shareholding reduction is factored in. We suggest investors pay attention to dividend yield, given earnings downside risk in capital gains caused by bond mark-to-market loss on higher domestic interest rates. The company's fair value estimate and ratings are under review pending the transfer of coverage to another analyst.