First Read: Tokio Marine Holdings "Excessive concern over future M&A appears..."

Research evidence excerpt

First Read: Tokio Marine Holdings "Excessive concern over future M&A appears..."

We are revising our earnings forecasts. We now expect consolidated adjusted profit to Koichi Niwa

grow at a CAGR of 14% from FY3/26 to FY3/29, up from our previous forecast of 7%, Analyst

implying solid earnings growth. By major segment, we forecast growth of 16.3% for the koichi.niwa@ubs.com

domestic P&C business (prev. 2.7%), 19.5% for the domestic life insurance business +81-3-5208 6245

(prev. 8.3%), and 11.4% for the overseas insurance business (prev. 7.9%). For domestic Makoto Ishii

P&C, we factor in the continuation of the premium increase cycle driven by rate hikes. Associate Analyst

For domestic life insurance, we reflect higher investment income. For overseas makoto.ishii@ubs.com

insurance, we assume that the impact of softening will be smaller than previously +81-3-5208 3097

expected and incorporate this as a revenue growth factor. The main reasons for the

target price revision are a change in the valuation base year—FY3/28 for BPS and FY3/32

for the perpetual growth rate calculation—and a modest increase in the cost of capital.

While we highly value the company’s growth scenario, we conservatively factor in

execution risk and uncertainty over the scale of future large overseas acquisitions. In

addition, reflecting the transition to IFRS, we are raising our EPS forecasts by 22% for

FY3/27, 11% for FY3/28, and 26% for FY3/29.

Valuation:

Our price target is based on a residual income model (RIM). Specifically, it is calculated as

the sum of 1) BPS of ¥4,558 (UBS forecast for FY3/28), 2) discounted present value of

¥1,008 (residual income period: UBS forecast for FY3/29- 31), and 3) terminal value of

Highlights (¥) 03/24 03/25 03/26 03/27E 03/28E 03/29E 03/30E 03/31E