Tokio Marine Holdings (8766): Compelling holding on BRK partnership and many strength, but overly high PO adjusted

Research evidence excerpt

Tokio Marine Holdings (8766): Compelling holding on BRK partnership and many strength, but overly high PO adjusted

Shareholder return policy

No particularly surprising shareholder return policy was announced following the results

on the 20th. Company guidance for FY3/27 DPS came in at ¥245, ¥5 above our estimate,

while the share buyback was set at ¥400.0bn. Of this, ¥280.0bn corresponds to the usual

2% of market capitalization, with an additional ¥120.0bn on top. There is no explicit

formula behind this. Management indicated that it considered the recent decline in ESR

to 268% (down 30pt YoY) due to higher US interest rates and bolt-on M&A. The decision

also appears to reflect the difficulty in quantifying the flexibility provided by the

partnership with BRK.

Management explained that if large-scale M&A cannot be executed over the next year,

capital allocation will be determined based on its stated priorities—dividends, growth

investments, and share buybacks. As such, if M&A does not materialize, there is

potential for buybacks to exceed the current ¥400.0bn level.

DPS from FY3/28 to be around 50% of 3-year average adjusted profit

The FY3/27 DPS of ¥245 is based on the previous policy of 50% of the five-year average

of group adjusted profit under the old standard. From FY3/28 onward, this will shift to

approximately 50% of 3-year average adjusted IFRS profit. The FY3/27 company DPS

already corresponds to 52% of 3-year average adjusted IFRS profit.

If gains on equity sales in FY3/27 significantly exceed expectations, there is a possibility

of revising DPS upward. However, in our view, minor fluctuations are unlikely to lead to

changes in the current DPS forecast, as it is already broadly aligned with the ~50%

payout policy based on 3-year average adjusted IFRS profit.