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Domestic Non-Life Insurance Business

Japanese

Domestic non-life insurance business is a core business of the MS&AD Insurance Group, having accounted for more than 60% of the Group Core Profit in fiscal 2015.
The Group’s three non-life insurance companies have distinctive strengths, and they leverage Japan’s largest agency network as they strive to address the diverse new kinds of risks faced by evolving industries in Japan as well as the risks associated with the changing lifestyles of individuals.

Group Numerical Management Targets

Picture:Group Core Profit (Domestic Non-Life Insurance)

Picture:Non-Life Insurance Combined Ratio (Domestic Non-Life Insurance)

Recognition of the Operating Environment

Business Environment and Risk Recognition

Deceleration of Growth in the Domestic Non-Life Insurance Market due to Further Progress in Falling Birthrate and Aging Population

The number of registered automobiles is projected to decline due to young people’s decreased use of automobiles, and other lifestyle changes as well as further progress in falling birthrate and aging population and a decline in housing starts. Competition could, therefore, intensify with deceleration of growth or shrinkage of the domestic non-life insurance market.

Picture:Projected number of new housing starts (thousands)

Picture:Projected number of registered passenger cars (thousands)

Changes in the Social Environment

Society is demanding the development of new products and services in response to societal changes accompanied by the emergence of new risks and regulatory relaxation measures producing new market sectors.

Expanding Scale of Damage due to the Occurrence of Large-Scale Natural Disasters

Owing to the impact of global warming, the incidence of largescale natural disasters is tending to rise worldwide, and risk management in the event of natural disasters is, therefore, becoming an important management task.

Intensification of Competition in Direct Non-Life Insurance Markets

Although the direct non-life insurance markets are growing stably, competition is continuing to intensify with existing domestic companies and other direct companies. The resultant reduction in insurance premiums and increases in marketing costs are placing a downward risk on the profitability of business in those markets.

Declining Investment Income due to Ongoing Environment of Ultra-Low Interest Rates (Negative Interest Rates)

The continuation of ultra-low interest rates (negative interest rates) in Japan resulting from the Bank of Japan’s adoption of “Quantitative and Qualitative Monetary Easing with a Negative Interest Rate” in January 2016 and continuation of a low interest rate environment worldwide are causing concerns about declining investment income and risk of bond price fluctuations when interest rates increase.

Growth Opportunities

Development of Products and Services that Respond to Changes in the Social Environment and New Needs

In an environment where the domestic market is maturing, we need to develop and provide products and services that respond to changes in lifestyles and the social environment as well as to new technologies and new risks by using our brand strength and network as the largest company in the industry in Japan. For example, by developing insurance products and services that respond to a falling birthrate and aging population and households with elderly persons living alone and also by developing products in fields such as nursing robots, renewable energy, and regenerative medical treatments, the MS&AD Group is aiming to pursue growth of its domestic non-life insurance business through support for science and technology progress.

Realizing Growth through Greater Sophistication of Risk Management

Based on experience gained in connection with the major flooding in Thailand during 2011 and other situations, the MS&AD Group is responding to risks associated with large-scale natural disasters by the sophistication of its risk management, especially as for natural disasters, by attempting the risk dispersion and by taking risks under appropriate risk control. Additionally, the Group will strive to realize sustainable growth going forward by ensuring that it has sufficient financial stability to respond to such risks.

Stability and Expansion of Profitability in the Voluntary Automobile Insurance Market

Although underwriting profitability in the voluntary automobile insurance market had continued to deteriorate since 2009, we have been able to improve profitability through such means as efforts to improve the loss ratio and revision of premium rates, enabling the MS&AD Group, which has the No.1 share of the domestic voluntary automobile insurance market, to reap large benefits and increase the stability of its revenue base. Going forward, we will continue to increase productivity through top-line growth and cost efficiency synergy. While intense competition in the direct insurance market is expected to continue for some time, by leveraging the Group’s collective strengths to provide appealing products and services, we will sustain and expand the support we receive from our customers in the market.

Greater Sophistication of Investments amid Ultra-Low Interest Rates

Amid continuation of an ultra-low interest rate environment, we will practice diversified investment, based on ALM, while emphasizing stability and liquidity, and will also aim to increase the return on risk through diversification and increased sophistication of investments in pure investment areas.

Business Strategies

1. Leveraging Diversity

The MS&AD Group leverages diversity, which is one of its strengths, in an effort to ensure its growth potential and increase its profitability by responding to customers’ risks and needs as they diversify along with changes in the social environment.

Picture:Diversifying Customers’ Risks and Needs with Changes in the Social Environment

2. Stage 2 Strategies and Initiatives

<The Strategies for Stage 2>

  • ・MSI and ADI will work at the evolution of reorganization by function and will also achieve higher earning power through the top growth in Japan and efficiency by implementing greater Group standardization and sharing based on their respective business concepts.
  • ・Together with Mitsui Direct General, we will establish our place as the No. 1 non-life insurance group in the domestic market through groupwide efforts to comprehensively meet diverse customer needs.

<Specific Strategies and Initiatives>

Simultaneous Realization of Growth and Efficiency

We will aim to reduce the aggregate expense ratio for MSI and ADI to 32.2% in fiscal 2017 through the simultaneous realization of growth and efficiency.

Picture:Net premiums written and aggregate expense ratio for MSI and ADI

Initiatives to Further Boost Synergy

MSI and ADI will implement greater standardization of products and mutual use of measures to expand reorganization effects.

Reorganization of the Claims Service Area

Aiming for further evolution of reorganization by function, MSI and ADI will develop a shared claims service system based on standardization of operations. By sharing claims handling service functions, the two companies will strengthen functions and increase efficiency with the aim of realizing industry-leading claims service.

Picture:Increasing Customer Satisfaction, Claims Handling Capabilities, and Productivity to Realize the Industry’s No. 1 Claims Service

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