MS&AD Insurance Group Stock

Ladies and gentlemen, esteemed investors and analysts, thank you very much for taking time out of your busy schedule to join today's earnings conference call for MS&AD Insurance Group Holdings, Inc. My name is Hayashi from the IR Department, and I will be moderating today's session. Also participating are Mr. Nakayama, General Manager of the Accounting Department, together with the colleagues from both the IR and accounting departments.

The presentation materials are available on our company's website under the Investors section, specifically in the IR events area listed alongside the earnings release and other related disclosures for the fiscal 2026 first quarter results. Please have these materials ready as we proceed.

As with our previous conference calls, we have included a summary of today's presentation in the materials. Therefore, at the outset, I will focus only on the key points, and we will dedicate most of the session to the Q&A. We aim to conclude the entire meeting in approximately 45 minutes, and we appreciate your understanding.

Furthermore, please be aware that today's presentation may include forward-looking statements based on our current forecasts. Such statements are subject to risks and uncertainties, and actual results may differ materially from these projections. We kindly ask for your understanding in this regard.

Now let me briefly outline the key points of our financial results. The key highlights for today are shown on Page 4 of the presentation materials. First, adjusted profit for the first quarter of fiscal 2026, excluding gains from the sales of strategic equity holdings, was JPY 251 billion, an increase of JPY 64.7 billion year-on-year. This represents solid progress at 47.2% of our full year forecast.

In addition, group adjusted profit, which serves as the basis for shareholder returns, increased by JPY 71.1 billion year-on-year to JPY 310.6 billion. This also represents very strong progress at 38.8% of our full year forecast.

Breaking down adjusted profit by business segment, the domestic non-life insurance business recorded 126 -- the domestic non-life insurance business recorded JPY 124 billion, an increase of JPY 4.2 billion year-on-year. This was mainly due to improved loss ratios in automobile insurance, reflecting the positive impact of rate revisions.

In the international business, adjusted profit increased by JPY 52.9 billion year-on-year to JPY 108.8 billion. This strong growth was driven by continued low loss levels, higher revenues across all regions, particularly in Europe and the inclusion of equity earnings from W.R. Berkley Corporation, which began this quarter.

In the domestic life insurance business, insurance service profit improved to JPY 16.5 billion, an increase of JPY 4.4 billion year-on-year. This was mainly due to a reduction in losses on onerous contracts following a review of key assumptions such as mortality rates.

Next, I will explain insurance revenue in each business segment. Please turn to Page 8 of the presentation materials. Insurance revenue for the first quarter of fiscal 2026 was JPY 1.6158 trillion, an increase of JPY 208.8 billion year-on-year.

Breaking this down, insurance revenue from the domestic non-life insurance business increased by JPY 31.4 billion year-on-year to JPY 819.3 billion. This growth was mainly driven by higher automobile insurance revenues, reflecting the positive impact of rate revisions.

In the international business, insurance revenue increased by JPY 169.7 billion year-on-year to JPY 707.7 billion, driven by growth across all regions, particularly in Europe as well as the positive impact of foreign exchange rates.

Next, I'll provide an update on natural catastrophe losses. Please turn to Page 9 of the presentation materials. In Japan, although natural catastrophe losses for the 2 domestic companies increased by JPY 5.8 billion year-on-year, mainly because there were no major events in the same period of the previous year, the figure remains within our full year forecast range.

Overseas, natural catastrophe losses decreased by JPY 1.3 billion year-on-year as there were no significant events in the first quarter. This is also within the range of our full year forecast.

With regard to natural catastrophes that have occurred since July, including the Kumamoto earthquake, detailed information is not yet available at this time. However, we currently expect these losses to remain within our full year forecast.

Next, I'll explain the status of our sales of strategic equity holdings. Please turn to Page 13 of the presentation materials. Gains on the sale of strategic equity holdings in the first quarter increased by JPY 6.4 billion year-on-year to JPY 59.6 billion, showing steady progress toward our full year target of JPY 268 billion.

Finally, I will provide an update on our ESR. Please refer to Page 11 of the presentation materials. ESR rose by 1 point from the end of March to 215%, reflecting the accumulation of retained earnings, including those earmarked for shareholder returns. We continue to maintain a sound financial position.

As for the denominator, integrated risk volume, while we continue to sell strategic equity holdings, it increased due to factors such as our business investment in Barings, which was closed in May, and rising domestic stock prices. As for the numerator, net assets at market value, as mentioned earlier, these have increased due to the accumulation of retained earnings. As a result, the level remains roughly unchanged from the end of March.

That concludes my remarks. We will now begin the Q&A session.

To begin, I'd like to invite Takemura-san from Morgan Stanley.

I am Takemura from Morgan Stanley MUFG Securities. I have 2 questions. My first question is Slide #7. I'd like you to give us more detailed explanation. On year-on-year basis, profit is increasing and especially international business, it seems that the profit growth was big. So could you please give us more color?

Last year, 20.7 plus, that was coming from W.R. Berkley. So the remaining portion, Europe, I think it's coming from lower loss ratio and Asia evaluation-related profit. That's my understanding. Is my understanding correct? That's my first question.

Takemura-san, thank you. Slide #7, adjusted profit breakdown, especially the international business. The explanation on the numbers, I think, is your question.

I am Nakayama from the Accounting division. Thank you very much for your participation. And talking about the international business adjusted profit, please refer to Page 21. There is a waterfall chart.

And if you jump to Page 21, you will find regional breakdown. There's a chart below. And as your understanding, basically, your understanding is correct, JPY 20.7 billion increase in U.S. is the biggest contribution, but Berkley accounting for more than 50%.

On the other hand, transfers in the U.S. business itself, profits were growing. All in all, we've been able to grow by JPY 20.7 billion. So it does not mean that the majority of JPY 20.7 billion is coming from Berkley. It's about half, a little bit more than JPY 10 billion. That was about the Americas.

Moving on to Europe, increased by JPY 18.6 billion and MS Re was making the biggest contribution, JPY 9 billion; Amlin, JPY 5 billion; GU, JPY 5 billion for the breakdown. And the underwriting -- not only the underwriting profit, but also management -- investment management is doing well. So profits were increasing.

Lastly, Asia, JPY 14.9 billion increase year-on-year, close to JPY 10 billion is coming from MSIG Mingtai, Taiwanese subsidiary. And following the Taiwanese share price increase, the valuation loss we were being able to recognize, that was a major contributing factor. In First Capital, because of FX, we've been able to increase the profit by JPY 2 billion. These 2 businesses were contributing mostly.

My second question, Slide #16, expense ratio. If we look at the expense ratio decreased by 0.3 percentage points year-on-year. And based on that, following the domestic subsidiaries consolidation, how you've been able to make improvement in your expense ratio or expense? This is my first question. And can we expect the decrease in expense ratio is going to be continuing even in the future with the same speed?

Thank you. The second question is domestic non-life insurance expense.

I am Nakayama. I will answer to your question. We have maintenance fee and new policies expense. You will find the breakdown below. And first of all, expense, basically following the recent inflationary situation, both personnel costs and other costs rising.

But as you see, top line is growing. So the ratio -- expense ratio has been improving. And the new policy following the rate revision, the commission has been improving. That should be one of the major reasons. That's it.

That means out of -- to achieve the JPY 150 billion in annual target, you have been making a good progress at end of Q1, and you are being able to enjoy positive effect. Am I correct?

Well, JPY 150 billion, the target is by 2030. So JPY 150 billion will be reduced by 2030. And if we are already achieving certain results, after the consolidation, we're going to streamlining. So we should not expect that immediate impact is taking place. Approaching 2030 in a gradual manner, we believe that the visible impact -- well, positive impact should become more visible.

Next person is Sakamaki-san, Mizuho Securities.

This is Sakamaki from Mizuho. I also would like to ask 2 questions. First, regarding natural catastrophes domestically, compared to your peers, it seems that the claims that have been incurred are relatively low. So how far have you reflected typhoon impact? And regarding growth incurrences, growth claims as well as the recovery through reinsurance, can you also sort that out for us?

Sakamaki-san, thank you very much. First is about natural catastrophes domestically.

This is Nakayama speaking. I'm on Page 9, where there is a page on natural catastrophes. As you can see here, main ones would be Typhoon No. 6 which we have accounted for by JPY 6 billion, comparing ourselves against 2 peers, saying that we are relatively low or high.

But with regards to how much we account for for nat cat, as you can see under the star, this is on an internal basis, and that's how we have derived these numbers. So for other companies, they may account for smaller claims as well. So this is not an apple-to-apple comparison. That's all from me.

And how about Typhoon No. 7 and 8, you haven't really accounted for them?

No, we have not included 7 or 8.

I see. My second question is about MS Re. I'm on Page 24. Regarding -- it seems that the discounting has been impacted, your performance and loss ratios haven't really gone up for MS Re. So are there any portfolio changes or excluding discount impact, can you give us some flavor on what has happened?

Thank you very much, Sakamaki-san. For MS Re loss ratios, that was your question. I'm on Page 24. And as you rightly said, regarding the discounting and natural catastrophe impact, when you add it back, it's 83% for fiscal '26 and 79.2% for fiscal '25.

So it has went up by 3.8%. The loss ratios were too good last fiscal year. That's the trend we saw. And you may remember, Baltimore, a bridge in the U.S. collapsed, and that was a large loss. And on a market-wide basis, that boosted losses, and that has been accounted for by MS Re too. So compared to last year, it looks like it has been going up. But we are still in the first quarter. So we will continue to monitor the trends against our full year plan.

I think this is associated with MS Amlin as well. Were there any impact from the Middle Eastern circumstances regarding Amlin or MS Re?

For this quarter, no. For MS Re, no, but for MS Amlin, there were some loss notices that have come in, and we have been accumulating reserves in accordance. So for Amlin, there has been some reserve impact in light of the Middle Eastern conflict.

Next, Mr. Muraki from SMBC Nikko Securities.

I am Muraki from SMBC. Europe and U.S., I have questions. First is about Europe. Amlin, the Middle East situation has been happening, but still loss ratio much lower than your plan, I believe. What is the reason? And what about the sustainability? That's my first question.

Thank you. So that was about Amlin loss ratio after incorporating the Middle East impact.

I am Nakayama. Page 23, please. As you mentioned right now, yes, loss ratio has been trending well. On a year-on-year basis, you will find what -- how we've been able to make improvement. And there's no special reason why the situation number is improving, but we are still only at the end of Q1. So at this moment, yes, the progress is good. That's what we're incorporating, but we'd like to pay close attention to the situation. That's it.

My second question is on Page 21, the Americas. And I think domestic non-life, I think, is included in the others. But in United States, the liability loss, you were recognizing the company was incorporating. But how are you viewing the situation is my question. And other than W.R. Berkley, U.S. business, softening situation, how are you being impacted or not is my second question.

The second question is about the Americas, mostly liability insurance loss, especially for Japanese companies, the recent trend and excluding W.R. Berkley, softening situation in the U.S. was your latter part of your question. Thank you.

Nakayama speaking. First of all, Japanese companies' liability insurance for their overseas businesses, that's not included in the others out of the international business. But because they are Japanese companies, our accounting, we are incorporating in our domestic insurance business.

And answering your question, yes, we are underwriting liability insurance from the Japanese customers, but the overseas business is related. Underwriting, we are not recognizing large-sized loss. That's our current understanding. That's the current status.

And other than W.R. Berkley softening situation in the United States, talking about MSIG U.S., relatively immune to softening because we're focusing on specialty. And MS Transverse fronting is the main business -- front line is the main business. So at this moment, not affected by the softening situation.

And talking about Japanese companies, I heard that you are recognizing as non-life in domestic, but I think that the other business lines loss ratio deteriorating. Is this domestic, domestic liability or domestic overseas?

Nakayama speaking. Well, first of all, this is kind of complicated. But as long as the underwriting is taking place in Japan, regardless of whether -- where the accident is taking place, the loss is going to be recorded here in Japan. So it's going to be impacting the domestic loss ratio.

Next person is Watanabe-san from Daiwa Securities.

This is Watanabe from Daiwa. I have 2 questions. First is about strategic equities and the reduction. Compared to JPY 476.3 billion, which is your full year plan, how much progress have you made? And you talked about the overhang in Q4. Has this already been resolved with regards to your cross share holdings?

Thank you for the 2 questions. First is the progress rate about our strategic equity holdings. That's your first question.

This is Nakayama speaking. Please refer to Page 6 in the presentation at the top in the box. It says JPY 102.5 billion in the box. And it's a little bit over 20% when you compare it against our full year plan of JPY 476.3 billion.

So it's about 1/5 on a mark-to-market basis. Regarding the overhang concern about the sales of our shares, corporates that own large portions of our stock, the overhang issue has pretty much been resolved already. You can look at it that way.

My second question is about auto insurance. And the average payout size as well as claims frequency, has it exceeded your full year expectations or your company expectations?

So claims frequency as well as the average payout as well as the progress was the gist of your question. This is Nakayama. It's on Page 17 in the presentation, as we always do. Regarding frequency as well as average payout, we are expecting accidents to go down by approximately 1% in our assumptions.

However, result-wise, it didn't go down that far. On the other hand, for average payout, we were assuming that it was going to go up by 7% to 8%. But actually, it went below our expectations as a result. That's all from me.

How about claims frequency? Has it been going up or down?

Well, our assumption was that it was going to go down. And result-wise, the number of accidents have went down as well, but it hasn't went down as much as we have initially planned.

So if you net both out, were you performing in line with your expectations?

Yes, we were broadly in line.

Next, Tsujino-san, BofA Securities, please.

First is domestic loss ratio. Auto, according to Slide #17, it seems that the loss ratio has been improving. And I think the reversal of losses related to onerous contracts causing positive impact here. Am I correct? And if yes, what is the size of the impact? And if we exclude this factor, what could be the actual magnitude of the improvement? That's my first question.

And another question is about fire insurance. Serious losses, large-scale losses this year, what has been the situation compared to last year? That's it.

Thank you. Your first question is the loss ratio. First of all, voluntary auto loss ratio is improving. But if we exclude the contribution coming from reversal of losses related to onerous contracts, what could be the situation? And also you also -- you're also interested in fire.

Nakayama speaking. If you could please take a look at Slide #16, you will find domestic voluntary auto. And within the bracket, excluding nat cat, 2026, the ratio was JPY 59.4 billion (sic) [ 59.4% ], so improved by 1.5%. And yes, reversal of the onerous contract losses included here.

And if we exclude this factor, actually, the ratio increased slightly on a year-on-year basis. And the reason is because, first of all, the average repair cost rising. And yes, because of this reason, mostly the ratio has been deteriorating. And your other question is fire large-scale losses. That's because fire loss ratio also improving.

So I am interested in to know the situation of the large-scale losses. And by the way, onerous contracts, you also have with fire insurance rights. What is the impact here?

Fire insurance, first of all, large-scale losses, combining MS&AD on a total basis, almost flattish year-on-year. And if we exclude onerous contract impact, excluding the factor, 2.7% improvement. But if we exclude this factor, the improvement could be 4%. And I think that fire insurance because we've been able to revise the rate and also taking the development into consideration, we've been able to make improvement.

I see. That means even as of today, you still have additional onerous contracts. Am I correct?

No, no, no, no. Because onerous contract reversal, if you exclude improvement, could be 4% or more.

Right. So onerous contract is causing negative impact on year-on-year basis, right?

Because onerous contract, is it -- you still have additional new onerous contracts. Otherwise, the -- excluding onerous contract, the situation could not be worse.

Fire insurance reversal of onerous contract continuously happening, the reversal on a -- by the way, total basis, not only fire, total basis, reversal has been increasing.

Understand. But if we only look at fire, loss ratio improved by 2.7%. But if there was no onerous contract impact, the improvement could be 4%. That's what you're saying.

Right.

So reversal of the onerous contract losses, if that was causing positive impact?

No, the reversal amount has been less this year compared to last year.

I got it. Yes. So meaning the positive impact coming from onerous contract has been smaller this year compared to last year. Last year, the reversal amount was much more. That's why.

Yes. By the way, fire insurance, the reversal of losses of onerous contract is going to be smaller year after year. So the positive impact may become smaller. But still, because the contract period is long for fire insurance, the positive impact is going to continue approaching 2030.

Understood. My second question is, if I look at your balance sheet, there's JPY 324.9 billion noncurrent -- intangible assets. And I think the number was like JPY 500 billion at the end of the last fiscal year and it decreased, but Q1, the number did not increase, although there was -- should be Barings impact. So were there any factors also incorporated here?

Intangible asset, yes, the balance is now JPY 324.9 billion. These are -- the biggest intangible assets should be soft there, amortization or M&A-related, the intangible assets included. Thinking about goodwill, approximately JPY 40 billion. Other intangible assets, we have like JPY 70 billion, which are incorporated within this number. But Berkley or Barings, they are not our subsidiary.

So they are just equity method affiliate. So they are not included here. It's not -- they are not part of our intangible assets. Their contribution is coming under the profit or loss coming from our equity method affiliates. Of course, investment in Berkley and Barings we are making, but that has nothing to do with our intangible assets.

Next is Tokai Tokyo Intelligence Laboratory, Mr. Mashima.

This is Mashima. I might be going into detail about Page 29, where you talk about MSP Life and the CSM balance. Because you were talking about the CSM balance increasing mainly due to CSM non-variable products as a result of rising stock prices, but how are we supposed to look at it? What is the logic behind this?

We're on Page 29, which was a question on CSM balance.

This is Nakayama speaking. We are on Page 29. And the third comment that we have. So the balance increased by JPY 10.6 billion for this bullet point regarding assumption change. For variable products, because of IFRS 17, there are 3 ways of measuring it. And there is this variable commission approach. That's the way we do the calculations.

For variable products, it is a customer account. So as a company, we receive fees. So it's a fee type business. So when stock prices appreciate for the special accounts or the customer account increases against the AUM, the fees will be incurred. So future cash flow inflow will increase. And that is why future profit or CSM, the balance increases. So that's the logic. So it's a little technical, but that's the logic under which this has been increasing.

My other question is also a technical question as well. Apologies. But for other non-life insurance companies, for Q1 seasonal factors associated with IFRS, there were some peers that have been commenting on that. I think it's your first IFRS results announcement. So have you been impacted by IFRS factors in Q1?

So that was a question on seasonality impact from IFRS. That was the second question.

This is Nakayama speaking. Regarding the premium distribution approach, when you distribute the premiums as a rule, you are able to account for seasonality. But in the case of our group, when we implemented IFRS and did the analysis, we have deemed that there is no seasonality.

Therefore, in accordance with that period, it will pass. So the earned premiums will be incurred basically in accordance with that period of time. Depending on the company, sometimes they do have seasonal differences because of certain parts of the year where there are more natural catastrophes. But in the case of our company, we do not account for that seasonality.

Next, Mr. Sasaki from Nomura Securities.

I am Sasaki from Nomura Securities. I have 2 questions. If I look at Slide #16, combined ratio. And if I look at Tanshin, there's a detailed material attached. And if I look at #11, the combined ratio there, the number is different. Is it because the definition of combined ratios are different?

Thank you, Sasaki-san. So combined ratio, the number we have on this presentation material and the number we have on Tanshin are different. That's what you're saying.

Nakayama speaking. Yes, as your understanding, the definition or the scope of the combined ratios are different. The presentation material, if you look at Slide #3, you will find how we are disclosing. If you look at MS, we are categorizing into 3 categories: domestic non-life, and international, and domestic life insurance. And we have business domains, as you see in our material.

So this is not about the entire company. We are -- we have 3 business domains. And based on the domains, we are calculating. But financial accounting, we have numbers for MSI. It's on a company basis, not on a domain basis. That's why depending on financial accounting and managerial accounting, the numbers are being different.

Okay. If that's the case, on your slide, you say combined ratio for the domestic non-life. I think that means you're not including international. And this international portion, where can I find the number?

It's part of the international. The number is not big. But if you look at Page 21, we have Thai in Asia. That's part of Asia on Slide #21. But generally speaking, subsidiaries numbers are big.

I see. My second question is the progress to achieve your full year guidances. And from now on, nat cat impact likely to be bigger. That's why you are currently maintaining your forecast.

But I think your progress ratio is performing well. And compared to your annual expectations, how should we see because especially over international, the profit growth was big in Q1. And could we believe that Q2 onwards, this growth momentums are going to be maintained? And if possible, strategic equity holding, no plan to change -- no change are you expecting is another question?

Well, the progress to achieve our full year guidances, and related to the question, strategic equity unwinding was the latter half of your question.

Nakayama speaking. As your understanding, as we are showing on Slide #10, the progress ratio, yes, we have been able to make a good progress at the end of Q1. And even compared to our internal Q1 expectation, we've been able to outperform, especially international, the progress ratio has been higher for sure. But international, the market, for example, share prices are trending well. That is one of the reasons for the outperformance.

So Q2 onward, we need to continuously pay close attention. And expense ratio as well, it's just at the end of Q1, so we should not be able to tell whether we can maintain the same momentum. So on as-needed basis, we may want to revisit the numbers, but maybe not. And unwinding the strategic shareholding at the beginning of the fiscal year, well, at this moment, we are saying that we do not have a plan to revisit our annual guidance.

But market momentum has been better than expected, and it is likely that unwinding your cross shareholding is going to be accelerating. But are you just keeping the initial guidance? Or is there any reason why you still do not revise your guidance?

Well, as of now, we do not think we are currently in a situation to revisit the target. But we will continuously consider whether we can further accelerate or not. But as of now, we do not think we need to revisit the annual target.

Next person is Mr. Sato from JPMorgan Securities.

This is Sato from JPMorgan. You were saying international was stronger than your company plan earlier, but how about your domestic business? It's your first quarterly results announcement after the implementation of IFRS. For natural catastrophes, your budget is quite big. I would like to hear what your view was on the progress you've been making during Q1.

Sato-san, thank you very much for your question. First is about the domestic business and our comparison against our plan as well as the progress made.

This is Nakayama speaking. Natural catastrophes was actually better than planned. For natural catastrophes, it was less than expected. And for other parts, like investments, when you look at investment management, we have been able to exceed plan, at least so far. So we are seeing things steadily progress. That's all for me.

Second question is about the impact from softening of the market. You were talking about the Americas earlier. But centered around Amlin, what about the European business? In the material, regarding the impact from softening, you spoke about it somewhat. And I think you accounted for it in your plan as well. So compared to your assumptions, how do you view the current trends?

Sato-san, thank you for your second question. Second question is about the softening of the market cycle, especially in Europe. Well, first, regarding Amlin, as assumed center around property, we have been seeing the market softening. And we have accounted for this in our plan, broadly speaking, but for some energy lines of business, we have been seeing a decline in revenue.

So that's where we are right now. For the softening of property, in order to secure profitability, we have been able to secure profitability from a technical standpoint.

So at this point in time, we have no major concerns. However, regarding future softening impact, we would like to consider various countermeasures when it comes to underwriting. For property, we do recognize that softening is happening, but in our portfolio, the nat cat risk is limited in its impact. Therefore, once again, we would like to ensure that we do underwriting that is being mindful of profitability.

So if that's the case, the total impact, apart from that, so compared to your plan, I guess Amlin and the energy line of business is deteriorating. So it's very specific, I guess.

Well, even for energy, the impact has not exceeded our plan substantially when it comes to negative impact. So I would say, broadly speaking, things are progressing in line with our assumptions.

Next, Mr. Niwa, UBS Securities.

I am Niwa. I have 2 questions related to natural catastrophe. The first question is Page 10, excluding nat cat, you're being able to make good progress in unwinding your strategic shareholding. But next year onward, can we expect that the momentum is going to continue? How should I understand that number being big?

Thank you, Niwa-san. Progress ratio, we should understand was the first part of your question.

Nakayama speaking. It's difficult to evaluate because this is our first year adopting IFRS. And even within our expectation, we were not expecting the number to be that high. But underwriting because of the less number of disasters, and also share prices have been trending well.

So dividend as well, we've been able to receive more than expected. We should not say this should be considered as the normal situation. So we will keep observing the situation. And we will figure out what -- which level we should consider as the norm. But again, we should not consider this Q1 result is going to be the standard or average for the coming Q1s in the future.

Another relevant question is possibly the group total exposure. Natural catastrophe-related risk, are you taking so much? Or are you being very conservative? Is there any color you can share with us?

Natural catastrophe fund, yes, we have JPY 150 billion equivalent in Japan and modeling, we are taking into consideration. We are calculating appropriately. So we do not think we're being too conservative. We believe that we are judging appropriately.

And the next question is about Kumamoto earthquake. Any comment you can make related to the expected impact?

Thank you. Kumamoto earthquake potential impact on our earnings.

Nakayama speaking. The earthquake in Kumamoto, the loss situation, we have not been able to have full visibility at this moment. Of course, OEMs, automobile OEMs or shopping malls or semiconductor-related companies are operating in the region. So certain loss should be expected.

But at this moment, it is difficult to discuss the specific numbers. On the other hand, talking about the earthquake, we are arranging for reinsurance. And as you have pointed out, we do have JPY 150 billion equivalent fund focusing on natural catastrophes. So we believe that all in all, the situation should be controllable, within our control.

Compared to 10 years ago, because Kyushu economy has been developing, and your underwriting situation may be different now compared to 10 years ago. So any color if you compare the recent Kumamoto earthquake impact versus the earthquake happened 10 years ago?

I could not fully listen to your question, but you're asking to compare the current exposure in Kumamoto compared to 10 years ago. Was that your question?

Yes. If there's any color you can share with us.

As of now, there are not enough information or data to compare the current situation versus 10 years ago because, first of all, the place where the earthquake happened not exactly the same compared to 10 years ago. So even if the exposure may be the same, is not going to be the same. But even if we assume it's going to be the same, the size of impact should be different. So it should be difficult to make specific comments at this moment.

Thank you, Mr. Niwa. As we are approaching the end of our allotted time, we will now conclude the Q&A session. If there are any questions we were unable to address today, please feel free to contact our Investor Relations department. We will be happy to respond to your inquiries individually.

This concludes today's conference call. We kindly ask for your continued understanding and support for the business activities of our group. Thank you very much for joining our earnings conference call today.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good afternoon, investors. Thank you very much for joining the MS&AD Insurance Group Holdings, Inc. Fiscal Year 2026 First Information Meeting. I am Hayashi from the IR Department, and I will serve as the moderator today. Thank you for your cooperation.

Before we begin, I would like to provide some information regarding audio and presentation materials. The original audio will be in Japanese. Webinar participants may listen in English by using the interpretation function. Please select English from the interpretation button on zoom.

Today's presentation materials are available on our official website. From the top page, please select Investor Relations and then IR Events and refer to the section titled Fiscal Year 2026 First Information Meeting. First, Funabiki, President and Group CEO, will give a presentation based on the materials for approximately 20 minutes. Following the presentation, we'll have approximately 60 minutes for Q&A. The meeting is scheduled to conclude at 5:30 p.m. Now let us move on to the presentation. Mr. Funabiki, please begin.

Hello, everyone. Am I coming through?

Yes.

This is Funabiki from MS&AD Holdings. Let me explain our group's future growth strategy and capital policy. First, please look at Page 4.

Since last year, we have announced the merger of MSI and ADI, the name of the new merged company, its executive structure and tagline. And we have also invested in W.R. Berkley and Barings. So today, I will share the vision for our group in April 2027 and in 2030. This organization chart illustrates that our group is a comprehensive insurance company covering all areas, direct underwriting and reinsurance in non-life, asset type and protection type in life and both personal and commercial domestically and internationally across both life and non-life insurance.

So comprehensive insurance company is the key for today's briefing session. However, we are not satisfied with the current situation. We aim to become an even more trusted and internationally expected comprehensive insurance company. Then I will explain how we intend to raise our level as a comprehensive insurance company and what our group will look like by 2030 to achieve this goal.

Now please look at Page 6. This April, we increased the number of CXO roles in the holdings company to clarify responsibilities and authority for operating the comprehensive insurance group. International business is now generating stable profits across all regions. So to enable mutual sharing of strength, the International Executive Committee headed by the Chief Global Officer or CGO, was launched in April this year.

And from April next year, we will incorporate the International Executive Committee or IEC, as MSIG International, an international business management company. The aim is to create an environment operated by multinational talent capable of global standard insurance management.

Next, the domestic life insurance business. In the domestic life insurance business, we will jointly develop products with MassMutual that are expected in the new from savings to investment era that is emerging in Japan. And we will also establish a framework to ensure sales are conducted through sound and appropriate processes.

To achieve this, we are reviewing whether the current 2 company structure is optimal. We are comprehensively considering the current situation and coming up with the plans that will be executed steadily.

Next, in domestic non-life insurance, merger benefits will be fully realized. And on top of that, we will make sure collaboration with non-life insurance business through direct channel. And we will further work on transformation to strengthen the framework. On top of that, to enhance our value as a comprehensive insurance company, we will strengthen our policy advocacy functions through InterRisk Research Institute. Risks associated with non-life insurance business in Japan and outside of Japan in the global markets, we'd like to make sure that we have the appropriate and enhanced policy advocacy functions.

As for the asset management, the asset management across group companies will be unified through Barings and the asset management functions will be further enhanced through group-wide collaborations. Right now, we are in the AI era. And with a view towards further AI technology advancement, we are also reviewing our system development framework so that we'll be able to leverage AI technologies. We are transforming the group's system development framework so that we'll be able to adapt to the changing environment in a speedy manner, both from the business perspective and also from the system development perspective.

Next, please go on to Page 7. Through these growth strategies, we believe that adjusted profit of JPY 800 billion by fiscal 2030 and JPY 1 trillion in the early 2030s can be sufficiently achieved without additional business investment. So from now, 5 years to 10 years from now, we will be able to achieve JPY 1 trillion. I believe -- we believe that is sufficiently possible. As adjusted profit approaches JPY 800 billion and profits by business segment become more diversified, as shown in the pie chart at the bottom left, the need to maintain ESR at over 180% decreases and ROE will rise accordingly. From that perspective, we believe that we should be able to increase and improve ROE accordingly.

Now please turn to Page 9. Last time, as you were informed, the adjusted profit in 2030 would be JPY 700 billion. The initial target for adjusted profit in fiscal 2030 was JPY 700 billion. But as initiatives have become more concrete across international, life, non-life and asset management, confidence and accuracy have increased, and the target has been revised upward to JPY 800 billion. And considering current market conditions, EPS growth target rate is set at 11% and adjusted ROE target is set at over 11%. And we believe this can be further improved through controlling net assets with share buybacks.

With 11% as a starting point, we believe that we should be able to continuously improve these metrics going forward. Please now go on to Page 11. This slide shows the progression of profit levels by business segment up to JPY 800 billion. Each business' growth is solid. And therefore, the adjusted profit target of JPY 800 billion for fiscal 2030 can be achieved without new business investment, as was mentioned earlier. Going forward, strengthening risk controls and share buybacks will bring ROE closer to our target of 15%.

Now please go on to Page 12 about EPS and DPS. Excluding gains from the sale of strategic equity holdings, securing JPY 800 billion in profit in fiscal 2030 will result in an average EPS growth rate of over 11% during the period. Going forward, as was mentioned earlier, we aim for higher EPS growth through profit growth and share buybacks as well as rising DPS through a progressive dividend policy. We believe these can be realized for sure. Next, please refer to Page 13 for our shareholder return policy. The total amount of shareholder returns continues to be set at 50% of adjusted profit. With dividends, our policy is to pursue a progressive total dividend amount.

As sale of strategic shareholdings are being accelerated, the reduction pace of special dividends will be increased with ordinary dividends rising accordingly. Please look at Page 15. The sale of strategic equity holdings is progressing smoothly with almost all approvals from issuers obtained. Over the next 4 years, sale will be accelerated rather than evenly paced. And about 70% of the planned sales will be completed in fiscal 2026 and 2027.

As for the proceeds from the sale of strategic equity holdings, there are no immediate plans for large-scale business investments. We will continue to consider investments in high-growth areas and overseas life insurers with stable and high cash flow with additional shareholder returns remain an option.

On the other hand, there may be concerns about the supply and demand for our group's shares. Regarding shares of our company held by counterparties in equity cross holdings, we have already made arrangements for large blocks with a high likelihood of sale within this fiscal year. We will refrain from disclosing specific methods, but we will strongly promote the dissolution of cross-shareholdings primarily through sales to institutional investors in a speedy and strong, powerful manner.

Now I will discuss the growth strategies for each business segment. Please refer to Page 17. First, let me explain the current position of our international business. The company already has a highly diversified business portfolio, broadly covering regions and customer segments around the world. We have been able to build a business portfolio that is highly diversified. The dark blue areas indicate the expected profit level at the JPY 600 billion milestone. By increasing market share in the Americas centered on MSIG USA and MS Transverse, we will expand international business earnings.

Although W.R. Berkley is not shown in the diagram, the company provides products through specified or specialized teams to a wide range of customers, mainly in the United States, achieving high profitability and growth. Going forward, we will leverage strengthened partnership to link their growth to our own. We are in the process of coming up with specific measures. I will elaborate on that later. Please turn to Page 18.

At the beginning of the presentation, I indicated that the international business would account for JPY 600 billion towards our JPY 1 trillion adjusted profit goal. Here, the path to that achievement is outlined. Up until now, because of the restructuring of Amlin that we have been focusing on, we have focused on resolving individual challenges such as the rebuilding of MS Amlin and entering the U.S. local market. But now each region is able to secure stable revenue. We recognize that we have now reached a stage to enhance growth as a unified group.

Therefore, have decided to significantly review our international business management structure. At the center of this is the International Executive Committee. Starting in April this year. IEC or the International Executive Committee consisting of international business CXOs and multinational experts is organized to enable swift decision-making from a group-wide perspective.

In Phase 2, from April next year, the International Executive Committee will evolve into MSIG International, a management company dedicated to the international business. In addition, by establishing a global HR system, we will build a management structure with highly skilled multinational talent and drive further growth in the international business. And in Phase 3, from 2030, group optimized global standard management will be established and a well-balanced portfolio centered in the Americas will be built.

Achieving adjusted profit of JPY 420 billion in fiscal 2030 and accelerating growth toward an early JPY 600 billion level. So that is the growth story we have been depicting. Please go on to Page 21. This slide highlights 3 key ways in which the transformation of our international business management framework will drive sustainable growth in international operations. The first is raising the profit level. By globally implementing underwriting standards, profitability will be enhanced and sharing specialty underwriting expertise from overseas subsidiaries and W.R. Berkley within the group will allow for more sophisticated case selection and stronger profitability.

The second point is stronger control over profit volatility. Diversifying by region and line of business will help reduce profit fluctuations, while standardizing underwriting criteria will strengthen underwriting and risk management. The third point is improved capital efficiency. By establishing a GRV, group retention vehicle in Bermuda, optimization of retention and reinsurance on a group basis will be promoted.

So regarding the international business, in closing, please refer to Page 23. Regarding W.R. Berkley, acquisition of a 15% equity stake was completed in March '26. Starting with this fiscal year's results, our share of profits will be included. Steady progress on synergy initiatives, including expanding reinsurance transactions and collaborating on specialty underwriting in Japan and ASEAN will drive adjusted profit to JPY 100 billion by fiscal 2030. Currently, our seconded employees and W.R. Berkley members are in the final stages of discussing further collaboration measures. We will accordingly make announcements when decided.

Page 24 covers the domestic life insurance business. Significant changes are taking place in market conditions and customer needs within the domestic life insurance industry. First, the shift from savings to investment, including the introduction of the new NISA is steadily expanding and is expected to accelerate further. This trend presents an opportunity for our group's domestic life insurance business. Our strengths are industry-leading asset type products from MSP Life and highly transparent and reliable sales capabilities through non-life insurance agents at MSA Life.

So we have these 2 companies in place. Through our recent partnership with MassMutual, a major U.S. life insurer, we have further strengthened our capabilities in competitive product development and capital efficiency through reinsurance. On the other hand, following scandals in the life insurance industry, industry rules regarding product sales methods will become stricter. And customers are increasingly inclined to choose companies that offer greater transparency and trust. To accelerate growth, we have begun reviewing the restructuring of the life insurance business framework so that we can further leverage our ability to provide products that meet customer needs through highly transparent sales processes.

With this aim and determination, we are currently striving to improve the business framework of the life insurance companies and the considerations have already started. Now please move on to Page 25. Due to the merger, the JPY 150 billion cost reduction from the merger of MSI and ADI is considered as a realistic target. So the goal is set at JPY 150 billion since last year, but it's not just about achieving the numbers, but efforts are underway to achieve it as early as possible. Please also look at Page 26, where we talk about domestic P&C business here as well.

I will now explain the status of profitability improvements in auto and fire insurance. In both lines, product and rate revisions implemented over recent years have been effective, resulting in a clear downward trend in the combined ratio. On the other hand, particularly for automobile insurance, we recognize that further rate revisions are necessary to maintain an appropriate loss ratio for ongoing business in light of significant inflation effects. Although this is still provisional, a rate increase of around 6% for automobile insurance is planned for April 2027.

Typically, we have done the revisions in January, but the timing this time around is April rather than January due to system adjustments required by the merger. For fire insurance as well, revision of rates and standard valuation amounts in April 2027 will help improve the loss ratio.

One more thing I would like to talk about is on Page 27 regarding the domestic P&C business. Here, I will discuss our automobile insurance strategy, including direct channel policies. Currently, customers are increasingly shifting to direct channel automobile insurance, driven by heightened price sensitivity and greater use of comparison websites. As this trend is expected to continue, efforts are underway to clarify the roles of MS, AD and Mitsui Direct within the group.

Related to this, please look at Page 28. Mitsui Direct will be renamed Mitsui Sumitomo Insurance Direct from April 2027, and its accumulated expertise in the direct market is expected to become increasingly strategic. We believe its value is going to increasingly enhance. Going forward to flexibly provide products that meet customer needs, coordination between MSI, ADI and Mitsui Direct will be further strengthened. Please turn to Page 29. Let me talk about asset management.

First, regarding Barings, investment was completed this month and personnel placement has begun as well. Going forward, synergy initiatives will be fully launched, including not only strengthening portfolio performance through outsourced management, but also improving capital efficiency and life insurance and developing competitive products. The outlook for additional expected profit in fiscal 2030 remains unchanged at JPY 75 billion, including returns from dividends and outsourcing reinsurance transactions as well as volume discounts on outsourcing fees.

Please look at Page 30. Here are the core strategies for asset management. In response to changes such as increased investment needs from the sales of strategic equity holdings and growth in international business, efforts will focus on enhancing investment infrastructure and expanding risk taking to further improve performance and profitability. Investment infrastructure is being strengthened through partnerships with trusted firms like Barings. And starting in April, planning, analysis and monitoring functions have also transitioned to a holding company-driven structure.

In closing, please refer to Page 35. Let me explain our shareholder return policies. The annual dividend for fiscal 2025 is JPY 160, and the forecast for fiscal 2026 is JPY 170. We will continue striving to increase the total amount of dividends. Strategic equity holdings are being sold ahead of schedule. And as we look towards fiscal 2030, the shift from special to ordinary dividends will be accelerated based on progress in adjusting profit and changes in the market conditions. For share buybacks, the basic return at the end of fiscal '25 has been set at JPY 190 billion. And for the first half of fiscal 2026, a basic return of JPY 80 billion is planned. The total for fiscal 2026 will be JPY 270 billion, up JPY 50 billion from the previous year.

This concludes my explanation about the material. I will be open to any questions that you may have. We would like to take any questions from the venue first, then after from people online.

We are very sorry that for today, investors and analysts, we'd like to address questions from investors, analysts only. Those who are participating, especially the media personnel on web line. From insider and fairness perspectives, this is one of the rare opportunities that we can talk to analysts, media personnel in the morning, in the daytime and in the night, we are always communicating through phone lines. So please refrain from asking questions the media personnel for today. And the person who raised the hand first, please go ahead.

This is Niwa from UBS Securities. I have 2 questions regarding international strategy and partnership strategies. In terms of the management model for international business, you talked about the new management model that has been implemented. From 3 perspectives, I'd like to ask questions. Looking at Page 19, what is going to change? To be honest, I'm not perfectly clear about that. And for you, how challenging will it be to implement this new management model?

And from the federated model to individual model to leverage the individual strength. I believe that is your objective. But what is going to change from the as is model? As for global talent, will your company be attractive to global talent, how are you going to leverage the employment opportunities for the international business? The other thing, the partnership strategy on the holdings level, I'm interested in knowing more about that. While other companies, your peers, Tokio Marine, they have the alliance with Berkshire.

While in your case, you are a company with restructuring history. So ROE 15% target in 2030, is there any strategic option to achieve that target ahead of -- well ahead of the time line? Or are you pursuing your own strategy individually? Regarding the international business, through the change of the management model, what is going to actually change? Well, from the federated system to centralized system, it appears that the transition is towards a centralized system. But what is actually changing? As a matter of fact, in order to secure global talent, does this change carry significance or will be effective to secure global talents?

Let me first share my views on that. And following that, CGO, Morimoto will add comments as necessary. Up until now, Mitsui Sumitomo and portfolio companies in which we have invested, Amlin and other companies. Those companies and ourselves, we have been engaging in one-to-one conversation and dialogue. As a result, we are able to produce the outcomes as we did. And Amlin in the same manner, just recently, MSIG USA local business was launched just recently. So over the past several years, we have implemented various initiatives. As a result of these initiatives, we have learned lessons. We have learned many things. We have produced successful cases as well.

Not only dependent on each individual relationships, but on the overall group level, we have been able to share the values of these and that would lead to overall optimization. While the group companies as well as the holding companies, it's not just about the Japanese ways of thinking and expectations that we have. But in each local market, local management team, local leadership, by knowing more about each other, they will drive the growth for which they are responsible.

And MSIG International as the base company, the international business will work as a team, one company, non-Japanese members are positively receiving this progress because they now have the responsibility and authority that is widened. They will be able to demonstrate their strength, leadership in the global company. And they are the ones who will create the future of such a global company. That will be a driving force, a big driving force. Speaking of a person aiming higher, aiming something different from what they have achieved in the past, they will be able to go one step ahead and go 1 mile extra.

So speaking of this sort of a transformation, as we transform ourselves into a global company, this is absolutely necessary processes and that is my view.

And accordingly, the moderate federation processes, instead of following those processes, we'd like to make sure that Japanese and non-Japanese members within a single company will be able to fully play their expected roles, how we can come up with a system as quickly as possible. We are following the necessary steps towards these visions.

May I -- did I answer your question? Morimoto-san, if you have anything to add as CGO, your aspirations and what's your feeling right now? Would you like to share?

Well, regarding this structure, CGO is a Japanese person. On the other hand, there are many non-Japanese members or management serving as CXOs. In the past, in this industry, this is a very rare structure that was established in this industry in the past. And now I'd like to ask our CGO to share his views.

Thank you for the question. This is going to be a big change. So this is a challenging endeavor, but we are fully confident in achieving this. Why are we doing what we are doing? To put it simply, as the President mentioned at the beginning, in 2030, -- towards 2030, we -- as a group, we'd like to transform ourselves to generate higher profits. And international business is to make a significant contribution. JPY 300 billion in current level is going to be doubled. This is a necessary processes that we have to follow towards that end. And this is a big endeavor, as I mentioned earlier.

Why are we doing this is that individual company, we have accumulated delegating authority sort of initiatives in the past. But we cannot really maximize the group power on an extension of what we have been doing. U.S. centered structure, there are some conflicts among the group companies that was within the expectation. But thanks to what we have been doing, the growth in the U.S. has been faster and stronger than expected. And what was expected to happen happened much quicker than we anticipated. So as a headquarter function, we had to clarify the functions and the underwriting appetite as a group policy needed to be disseminated.

Well, previously, one by one response was made, but we have to make an integrated policy as a group. And as part of this initiative, we wanted to really integrate the individual practices to make sure that we set forth the group vision and group wills clearly and whether this change is going to be attractive to secure global talent, we believe that this is going to constitute so much attractiveness.

We had this concept 1 year ago already, but MS International Strategy Committee, we talked about this concept. And although there were some differences, we were able to gain 100% unanimous agreement. And some of the members pursued this direction. If there are career development structure that is going to be established, this is something that they really wanted to promote.

Well, by participating in this new framework, they saw clear opportunities for them to leverage their strengths. And by having this overseas international businesses, the clear roles and responsibilities are now implemented. And we believe that overseas international members are positively receiving this. And to the second question, ROE, 15%. In order to accelerate the achievement, is there any possibility to consider capital alliance in the future?

Adjusted profit, JPY 1 trillion, processes towards this goal. And when we achieve this level, considering the ESR, when we consider the capital structure, first, the hurdle of 15%, we don't think that this is something that we cannot achieve on our own. So if we are only targeting ROE 15%, it doesn't necessarily require a capital alliance. But in order to accelerate the achievement timing, what would be the optimal capital structure? Well, we are not really eliminating any possible options. We are open to consider various options. But if there are any other members who would like to comment on their views, no views.

Muraki-san?

This is Muraki from SMBC. I have 2 questions. Looking at Page 15, on the right-hand side of the slide, for the Americas business, reinforcing capital is what you are going to need. It says capital enhancement for growth strategy in the Americas.

For the competitive environment and rate environment in the Americas, what is your view right now? You are seeing good top line growth. So I think it's capital increases at MSIG. But what kind of scale are you considering? Have you already done that? Or are you going to do it going forward? That's my first question.

Second question is about, you said comprehensive insurance company is a keyword today. So what is that intention? And for the life insurance business, it's quite big, including the overseas business as well. And that's why I presume you said comprehensive insurance company.

But for life insurance, according to your explanation today as well as the last time around, I think you were implying that there might be some reorganization within the group because you were saying that you are considering. So if you have any updates, I would be happy to hear about it. And also on Page 15, for corporate pensions and overseas life insurance business opportunities, I think you're implying M&A when you say investments. But what do you mean by that?

First, regarding the business in North America, we don't need new vehicles, but in the current organizational structure, we can grow our earnings by 3x because the North American market is property-centric, it is softening mainly in that area.

And also in the casualty area, it's actually -- we're seeing ongoing hardening. So it's not softening across the board. So I think there's still opportunity to increase earnings.

So then MSIG USA, why is it regarded highly? And why is top line and earnings growing? It's because of brokers in the U.S. from their point of view, MSIG USA is mainly increasing performance around the broker market or the open market. So from the broker's point of view, insurance company that is highly rated will offer stability to their policyholders. So in our U.S. business, capital allocation, our capital allocation strategies are being regarded highly in the open market.

And we believe there's still opportunity for more underwriting. And we believe that scale is 3x more. So we've been able to envision that picture. Therefore, we would like to enhance capital. That's what we were implying in this explanation on the slide.

For corporate pensions, in some geographies or regions, there are some areas where it's being strengthened strategically and in the life insurance area, in the areas to which we allocate capital, we are assuming that there may be a business opportunity. It's not about making investments immediately. But as you can see here, if we can expect -- we will be selective in selecting areas where we can expect steady cash flow. So for liabilities and assets, it's not going to be extremely high from the initial stages, but it will be gradual. So regarding the JPY 700 billion, the investment into Berkeley that we have done before and midsized investments into bearings, that's not the scale we are thinking about.

Also, with respect to what we're doing around life insurance, so from savings to asset management is a trend that has been upheld over various generations of administrations, and we believe this will continue going forward. And the options for the people of Japan, there's equities, there's fixed income as well as investment trusts. In the case of Japan, life insurance products, some people want to take out life insurance. It is still a promising area in that regard. So what we have in the primary vehicle with expectations that products will be delivered, it can be assumed that sales volume will grow.

And MSA Life through its channel, because of the relationship between primary and MSA, we have been expanding sales and customers and agents well received ourselves, and we feel that this business is promising looking out into the future.

In the life insurance industry, the competitive environment has been changing, and we believe more changes are down the road. So by leveraging the strengths of the 2 companies, we need to think about what kind of structure is ideal. And that is why we are striving to consider the reorganization. It may change, it may not change.

But in the next several months, we would like to ensure we go through a good verification process. There's still uncertainty around to the extent of how rules are going to change. So we don't want to draw conclusions quickly, but that's the time line under which we are making these considerations.

For the Americas, last fiscal year or this fiscal year, for the areas where you're going to do capital enhancement, is that the casualty space, not where it's softening. And it's not in the property space, I guess. And large corporations or middle market is target. Is that the same?

The weight of casualty, not limited to MSIG USA, but for Amlin as well, this applies to our entire portfolio. But for North America, even if it were to soften, if we have an appetite, we do believe things are well balanced.

Morimoto-san, do you have anything to add?

Let me make a comment. As you rightly said, Muraki-san, where the property market, it has been falling by around 10%, but the impact from softening has been small for us for excess liability, for cyber, for political risk areas. Those are the areas we would like to focus on or we are focusing on.

Originally, we were late in entering the non-Japanese business. So our history was shallow, meaning we are in a positive position to develop the business for distributors and agents and transactions, we have been working on that as well. We have about a 10-person team in the U.S. that we have built up. Touch points with the broker, we didn't really have that before. But now we are creating a team so that we are able to do so. And also for A+, our ratings is well received. For example, in the U.S., there's about 2,500 to 3,000 P&C companies, but there's only about 10% more or less of companies that have a ratings of A+.

So this is well received. And also, when it comes to Mitsui Sumitomo Group Company, which is ourselves, which has tradition from Japan, the way we are perceived in the U.S. market is positive. High reputation underwriters have been attracted as well, and we have been able to generate good impact. And in the surplus market, strong wholesale brokers or aggregators, partnerships have been worked upon. We have teams that are focused on distributor-specific opportunities in order to strengthen our business there. Thank you very much.

Our name in the U.S. is MSIG USA or Transverse. So we stress Mitsui Sumitomo the fact that we are a Japanese company and are perceived as a company that is managed Japanese style is actually well highly regarded that is leading to trust from our customers and reliability. So we believe the way we are organized there is a tailwind for our business. Thank you.

This is Watanabe from Daiwa Securities. I have a couple of questions. First is on Page 11. Regarding basic return, the adjusted profit from FY '26 to '29 is raised at JPY 800 billion, 50%, that means more than JPY 400 billion. Is that the level we can expect for shareholder return? And of which the proportion of dividend, the SOMPO Holdings dividend payout ratio of 50% is the level they are aiming at by FY '30. And are you also setting that dividend payout ratio as metrics?

Next is the pricing strategy on Page 26. This time, auto as well as fire insurance, you are planning to implement rate changes in 2027 April, while the natural disasters are decreasing in number. Can you talk a little bit about the background of the price revisions? And in April, former MSI and former ADI products, those products will be integrated as of April 2027. Regarding the adjusted profit, JPY 800 billion, the total return ratio of JPY 400 billion. Is that right?

I understand that is your question. Yes, JPY 400 billion is the level that we are looking to achieve in terms of dividend. In terms of the dividend payout ratio, up until now, in terms of absolute value, over the past several years, we have been increasing by JPY 10. So sharing the increase that is easy to understand. is leading to higher recognition of our business.

And we -- that was a driving force for us to create an environment where investors can make investments at ease, with confidence. Well, when we achieve JPY 800 billion, what is expected of us? And what capital policy needs to be implemented? There is highly possible that the environment surrounding our business will have changed, but we'd like to make appropriate decisions as necessary. And we would like to also make sure that we will live up to your expectation. That was to address your second part of your question. Is there anything to add? Nothing special? If you have dissenting opinions, please share.

Next is regarding fire insurance. Over the past year or so, more than expected, the natural disasters compared to the past incidences, the natural disasters did not occur. The number of natural disasters was lower than expected. But based on our modeling, unfortunately, this fiscal year and onwards, we have to assume that some sort of natural disasters would occur.

Based on that, product revisions and rate revisions will need to be implemented. especially auto and fire, what is common is the repair cost, the cost of parts and components and repair-related personnel costs, labor costs on both fronts, these costs were not particularly high in the past, but these costs have been rising.

So how we have to address these cost increases is part of the societal issues. So the repair-related costs have been rising more than the inflation rate. And that is something that we have to assume. And under the circumstances, we believe that product revisions and rate revisions will be necessary. The revisions are scheduled in April that the products to be offered in April and beyond, MSI and ADI will be one company. So it is right to assume that the products of MSI and ADI will be integrated by then. That is true.

Next, Takemura-san, please go ahead.

I'm Takemura from Morgan Stanley MUFG Securities. I also have 2 brief questions. Regarding the sales pace of strategic equity holdings, I just wanted to confirm if I understand it correctly. So I'd like to check that with you. Somewhere in your explanation regarding strategic equities, for this fiscal year and next fiscal year, you were saying that you will go through the procedures to sell. It's JPY 1.6 trillion out of the JPY 2.3 trillion, which is JPY 400 billion, which means that for next fiscal year, it's going to be really high if you do the math. So can you talk about the sales pace for strategic equity holdings for this fiscal year and next fiscal year? Is it going to be even over the 2 years? Or is it going to accelerate next fiscal year? That's my first question.

Second question is regarding automobile insurance, direct insurance online. I would like to hear about your thoughts. I've been participating at other companies' briefings as well. And I think they are also saying that they would like to focus on the direct business. And there has been some dynamic share changes as well. But what do you think is the reason why people select your product? And how are you going to strive to increase your share?

Regarding the sales of strategic equity holdings and its pace, with the issuers, you need to agree with them and gain their approval. So according to the agreements we've been reaching, it will be over this fiscal year and next fiscal year, but the balance is not necessarily the same and even. So that difference is reflected in our earnings plan or guidance. Does anyone else have something to add from our side? No.

One more thing is for the direct business and how we view the market. other companies and their strategies on the direct business, I have not yet taken a close look at it. But based off that, doesn't necessarily mean that it's similar in strategy.

In the case of our company, for auto insurance solicitation rules, it is going to change substantially and the necessity for comparison is going to increase. So issues in comparison with other company products and prices are not just going to be the sole issue. In the new solicitation rules, it's a matter of towards the customer, how are their needs going to be reflected and how the -- well, customers used to work with a certain distributor. And depending on its circumstances, we need to be able to offer products that are relevant and in an appropriate way.

So it's more of a methodology thing. It's not just about competition and rate setting no longer. It's about the process of delivering products to the customer and which format is most relevant. So that is what we need to -- we are striving to reconsider and reestablish. And that is why we wanted to talk about this area of business. So with the customer, so agents used to do the solicitation. But after the rule revisions, the 3 parties need to figure out the new way of doing business.

And it's not just MS&AD. But on top of that, the direct business will be coming into the picture in order to create an organization or team that is more optimal from the customer's point of view. So I hope you could understand that as you compare ourselves with other companies. Thank you.

Sato-san, please go ahead.

This is Sato from JPMorgan Securities. I have 2 questions. First question is on Page 7, the future profit outlook, JPY 1 trillion. Just as an image, well, maybe the number is rounded up by the unit of JPY 100 billion or so. Well, on top of that, I would like to ask about the international business path to achieving the JPY 600 billion adjusted profit.

For domestic non-life insurance, the meaning of this JPY 300 billion in around 2030, the target for domestic non-life is JPY 240 billion. So does that mean that you still have a room to further grow?

Well -- or if this number includes the financial services, that means that the growth will be flat from that point on. If the former is true, well, the sale of strategic shareholding is accelerated and the merger effect of JPY 150 billion is going to materialize. From FY 2030, what are the drivers that you are expecting to leverage? That was my first question.

And second question of mine is regarding the organizational transformation, the life insurance planning department was established. While this is attracting an attention, it was spun out from the total planning division or so. And Kudo-san and Morimoto-san are the executives in charge of this function. So it seems like this department has a mission beyond what measures to implement to grow the life insurance business. So what was the rationale behind establishing this department?

Regarding the growth outlook of the domestic business, well, in the domestic market of Japan, non-life insurance business or market is a rare market that is continuously hardening. While when the world market is hardening, the Japanese market was softening. So the appropriate premium and design and premium setting is going to be necessary. And risk management promotion has been driven by the central government, and there is a new supply-demand situation arising for new products because of that. So this is an area with moderate growth.

And life insurance planning department, well, when you talk about the protection gap, this is in non-life insurance market, those who are living close to the mountainous areas and cliffs, the feasibility of enrolling in insurance programs or the premium burden on the young generations, those topics tend to be discussed first, that the so-called area of human beings or in the area of life insurance, the health care provided and the prices of that medical treatment can be paid by individuals based on certain financial conditions.

As the aging society is emerging, the pension burden is also increasing. So in the area of life insurance area, the protection gap is expected to widen. There is a heightening risk around that in Japan as well. In that regard, the reason of existence of life insurer is increasing. How we are going to address this challenge, we have to consider that. And we have to establish the system and structure in order to address this challenge. And this is the reason why we have been putting together the team of this life insurance planning department.

Kudo-san, who is the executive in charge of this department, if you have anything to add?

Thank you for your question. Up until now, within the comprehensive planning department, we have been addressing the societal challenges with the relevant businesses. But basically, what we have been doing is the monitoring. And with the merger of MSI and ADI, the holding companies and operating companies' roles and responsibilities are changing. Under the circumstances, as Funabiki mentioned at the beginning, we have been considering the optimal structure for the future. the consideration was and has been necessary.

That's why we established this department. The background to that is that the domestic as well as international life insurance companies in order for us to become a comprehensive insurance group -- insurance company, we have important missions to be performed. And I myself will be responsible for domestic and Morimoto-san will be responsible or cover the international side of the business. And that is how we divide roles and responsibilities between us.

So I wanted to ask this question after the second question was addressed. As part of your future vision of achieving JPY 1 trillion, the domestic life insurance business from 2030, the profit level will be flattish. How do you view this? What was the rationale behind this assumption?

At this point in time, we are in the process of developing new products. How much we can address the expectations of the general public with these new products based on the actual track record, we'd like to consider the next steps.

Well, JPY 100 billion by 2030 or JPY 350 billion by 2035. Well, it is not right to say that at this point in time. Of course, we'd like to aim for that level. But right now, we'd like to consider what is feasible. So from JPY 800 billion to JPY 1 trillion, the international, especially the North American business will have to make a certain level of contribution. These are the numbers with that assumption. While the life insurance business will be able to add growth to that level. The protection gap in Japan, in order to avoid this or to address this, we will have to be a comprehensive insurance company. That is the philosophy that we have. Did I address your question? Any other questions?

Going back to your focus on the direct business, well, maybe it's not a focus, but putting importance on the direct business, that's how I interpreted it. But at the beginning, you were saying -- you were talking about resolving the cross share holdings. I think I heard that. And also the deader channel, it's going to change and be reorganized. The dealer channel is going to change and you had overwhelming strength in the auto dealer channel. But do you think that things will have to go to the direct channel? Is that unavoidable?

The other thing is regarding consolidation of offices or sites, I'm talking about integration. I think you're already working on the consolidation. But how about the HQ functions for ADI and the dealer channels, and for Aioi Nissay, unlike other non-life insurers, I think it's slightly different and unique. So integrating the head office, is it going to be integrated as of April 1 next fiscal year?

For direct non-life, the business and how it should look like and the way we sell through dealer channels and how that's going to develop in the future. For dealers, it's actually a little rude to just say dealers in general because there's a -- there are broad-based dealers and some are just model specific. So the way of business is quite different dealer by dealer. And depending on the style of their business, how are auto products going to be provided. The dealers, respectively, have various options to choose from. So as a way of responding to their needs, we believe one important option is the direct channel. So that is why we would like to also focus on the provisioning of direct type products as well. So does that answer your question first?

Well, if that's the case, there's various types of dealer channels going back to your point, but for large capital dealers, are they not going to change?

Well, we don't think that they are going to immediately implement direct type products. That's not being assumed. Secondly, regarding head office integration for Aioi Nissay Dowa and for departments that are in charge of unique channels, but areas that were their strength, respectively, how we leverage off those strengths is what we need to consider. as we consolidate.

So maintaining and leveraging the strengths even after we come together so that it generates synergies is important. So we need to do these things together. So under one head office, we are already preparing to work as one. I hope that answers your question.

So former ADI -- are the former ADI people going to be in charge of their functions?

No, they're going to do it together. And customers are hoping that things happen together between the 2 entities. So we basically would like to meet expectations. Anyone else from the venue?

Sakamaki-san, please go ahead.

This is Sakamaki from Mizuho Securities. I have 2 questions. First question is regarding the bolt-on opportunities for Asia business. What sort of bolt-on are you looking to consider? In existing market, are you going to achieve share gain? Or are you going to expand your operating areas, geographical expansion? Can you talk a little bit about that?

The second is strengthening the domestic non-life insurance. In international, you are enhancing collaboration between regions to share know-how and expertise. But when it comes to domestic, you don't really talk about the domestic side of the business. Your peers are importing the expertise from international to domestic market. What is your thinking?

For Asian bolt-on opportunities, speaking of Asia, we are focused on ASEAN. We have licenses and bases in many countries and regions. And in any country, one thing common is that the number of companies is quite large. So bolt-on and other opportunities, we'd like to consider to acquire necessary parts or trade those parts that are necessary. So of course, we are anticipating such movements will progress. And of course, the distributors, same as in Japan, there are a large number of distributors in a very complex manner.

How we are strengthening the distribution capabilities, we may consider an investment in that area as well. So when we say bolt-on, there are a wide variety of opportunities. The ticket size, well, we are not really considering of a huge ticket size for each and every investment case.

And when it comes to our alliance in international market and how we are importing the expertise gained from those alliances back into Japan, this has to happen for sure. And in the past, from that perspective, I have been expressing my views in meetings quite proactively that these are very things that have to happen and investors and other regions, foreign investors didn't really appreciate that view because these have to happen as a natural consequence. Well, if necessary, I'd like to set up another opportunity to walk you through what we have been aiming to achieve.

Well, I understand from your speech that you have already established such a structure to share and import expertise from international to domestic market.

Well, those who have been participating on the web line online, are there any questions from them?

Those participating online, Sasaki-san from Nomura Securities, could we address your questions? Please go ahead with your questions.

This is Sasaki from Nomura Securities. Can you hear me?

Your voice is a little low. So can you talk out loud or we'll try to figure it out.

This is Sasaki from Nomura. I have 2 questions. One is about your international business. For the Indian market, is it in your growth strategy? Is it included in the scope? Market expansion, economic growth and mitigation of foreign companies is probably a tailwind for companies like yourselves. So is India included in your scope for growth? That's my first question.

So India is the first question. And what's the second question?

So let me ask the question first.

No, no, no. Let me answer your first question then about India. For India, population is increasing, economic growth rates are high. So in the past several years, we have been focusing on the business quite a lot. Regarding headcount, we've been reinforcing our team under the agreement we have with our partner.

But competition is quite intense in India. And the rate levels for the P&C market is very low. So if you invest people and capital, it's not as easy to generate profits. It's not that easy. Having said that, we are not able to invest into multiple numbers of insurance companies due to regulation. So you have to do business exclusively, and it's about how you swim in the red ocean. So that's what we are working on right now. But it's confidential as to our strategy. So let me withhold for today. What is your next question?

My second question is about -- not about your performance or results, but autonomous driving and your response, how are you going to do about these trends? For example, in San Francisco or in Dallas, when you look at what's happening around robotaxis, at an early stage, one can surmise that it's going to happen fairly quickly in Japan.

And also Waymo, a key player, they have started feasibility studies in Japan. And you were talking about up until 2030 today. But I do believe that autonomous driving may have an impact by a certain degree. So if I'm wrong, you could tell me that. But let me know how you are going to do about this.

For autonomous driving, when I visited the U.S. and when you go to the West Coast, obviously, there are opportunities to ride. And if you go to China, Shanghai, there is opportunities as well. But it's basically for geographies that have wide roads. But in the middle of Manhattan, I don't believe there's opportunity for autonomous driving yet. And also for China, I shouldn't be talking about China that much because I might be restricted from entering the country, but there are places where you can drive autonomously and other areas where you cannot. So it's not that easy to implement the technology.

So when you think about Japan, I think there will be limited places where you can drive autonomously. And when you think about unified types of auto insurance, we still have various challenges we need to overcome. That's my view. But anyone that is well versed on this subject? Kudo-san that used to do product development.

Thank you for the question. As the CEO just said, I think it's going to take a little more time. However, in Japan, when it comes to regional cities in Japan, there is a serious driver shortage happening. So although there are issues that need to be addressed, I think the introduction of autonomous driving or robotaxis may be earlier. And also for transportation companies, meaning vehicles for commercial use, mainly around expressways, there may be some autonomous driving vehicles that will be adopted.

So my personal view is around fiscal 2030, whether the technology is going to be embraced. I think we will still have more vehicles that are with drivers. So the adoption of the technology might be slightly beyond 2030. So does that answer your first question? What's your second question?

No, no, that was the second question. No, it was India and autonomous driving.

Next, Ms. Tsujino from BofA Securities.

This is Tsujino from BofA Securities. There are 2 questions. First question is regarding Page 21. WRB specialty know-how will be shared across the group and equity method subsidiary, when they become such an entity, in what ways will we be able to share their expertise? And at this point in time, what is the area you see good progress? The other question is regarding the cost reduction, Page 25. Agent commission, JPY 50 billion reduction will be aimed. How are you going to achieve these cost reductions? Primarily in the commercial area, are you looking to reduce the cost significantly? Do you have any visibility when it comes to this cost reduction efforts?

I'm not sure whether you are able to address this question here in this session, but how are you going to reduce the costs this much? Can you talk a little bit about that?

First, with regard to our alliance with W.R. Berkley and how we are sharing their expertise, the equity method adoption with this -- with our investment of 15%. Well, we -- even before we came to an agreement, we talked about how we share their expertise. And now they have accepted our personnel to work in their business, and they are well versed with what we need.

And even in Asia, what are the things we can provide in Asian market. In a very thorough manner, we -- they have been giving us lectures. While it's not within just 1 week or 1 month, we will be able to absorb their knowledge. Of course, we will need to take more time and in line with building trust relationship with them, we'd like to make sure that this will happen.

When it comes to agent commission, we are not looking to introduce uniform commission reduction. It is not such a one-way unilateral method that we are looking to implement. There are solicitation-related laws and revisions are expected and commission rates will change along the way. Under the circumstances, what level commission rates will be considered and will be finalized. The commission rate system, how we are changing the items based on which commissions are determined, this is sort of an internal discussion that needs to happen. And from that perspective, we cannot really disclose any more information at this point in time.

Are there anything to add from our members? No.

So well at another date, for instance, corporate agents, I assume that these are the areas you will be focused on. But through the merger, higher-quality corporate agents, if you are absorbing the other agents into the corporate agents, we are worried that the commission rates will even go up further. Under the circumstances, I was wondering what measures you will be considering and implementing?

Rather than the measures, well, it's about thorough dialogue communications and come to an agreement on what needs to be realized. So in those communications, I myself will be involved to really engage in sincere discussions among the stakeholders on the commissions.

So W.R. Berkley, in order to do various things with them, how many people are working in New York or how many people are involved in considering the products to be offered in Asia?

So the people working on site and also people working here to communicate with the local teams. Well, several tens of people have been working as the leaders in leading those efforts with the W.R. Berkeley.

Anyone else with a question? [Operator Instructions] Okay. As there appears to be no further questions, we would like to conclude the Q&A session here. If there are any questions we were unable to address today, the IR department will be happy to assist you. So please feel free to contact us. This concludes the MS&AD Insurance Group Holdings Fiscal Year 2026 First Information Meeting. Thank you very much for your participation today.

Thank you very much.

Ladies and gentlemen, esteemed investors and analysts, thank you very much for taking time out of your busy schedules to join today's earnings conference call for MS&AD Insurance Group Holdings, Inc. My name is Hayashi from the Investor Relations Department, and I will be serving as the moderator for this session. I appreciate your kind attention and look forward to your participation.

Today, in addition to myself, Hayashi, we are joined by Mr. Nakayama, General Manager of Accounting as well as members from the Investor Relations and Accounting Department. The presentation materials are available on our company's website under the Investors section, specifically in the IR Events area listed alongside the earnings release and the other related disclosures for the fiscal 2025 full year results. Please have these materials at hand as we proceed.

Please note that the results for fiscal year 2025 are presented in accordance with Japanese accounting standards, while the forecast for the fiscal year 2026 are based on IFRS. As with our previous conference calls, we have included a summary of today's presentation in the materials. Therefore, at the outset, I will focus only on the key points, and we will dedicate most of the session to the Q&A. We aim to conclude the entire meeting in approximately 45 minutes, and we appreciate your understanding.

Furthermore, please be aware that today's presentation may include forward-looking statements based on our current forecast. Such statements are subject to risks and uncertainties, and actual results may differ materially from these projections. We kindly ask for your understanding in this regard. Now let me briefly outline the key points of our financial results. The key highlights for today are shown on Page 4 of the presentation materials. For the full fiscal year 2025, consolidated net income reached a record high of JPY 787.3 billion, an increase of JPY 95.6 billion from the previous year.

Group adjusted profit, which serves as the basis for shareholder returns, also marked a record at JPY 1,000.9 billion, up JPY 269.1 billion year-on-year. Let me begin with an overview of our full year results for fiscal 2025, starting with the top line figures. Please turn to Page 11 of the presentation materials. Net premiums written at our domestic non-life insurance businesses increased by JPY 122.6 billion year-on-year, reaching JPY 3,269.6 billion. This growth was mainly driven by higher revenues in automobile and fire insurance, reflecting the impact of rate revisions.

Premium income from our domestic life insurance business increased by JPY 100.6 billion, reaching JPY 1,741 billion. This growth was primarily driven by higher sales at Mitsui Sumitomo Primary Life Insurance following product revisions. Net premiums written by our overseas subsidiaries rose by JPY 207.8 billion year-on-year to JPY 1,735.1 billion. This increase was driven by revenue growth across all regions with particularly strong performance in the Americas and Europe. Next, I will discuss our profit on a financial accounting basis.

Please refer to Page 12 of the presentation materials. Consolidated net income for our 2 domestic non-life insurance companies increased by JPY 49.3 billion despite the burden of merger-related expenses. This growth was mainly driven by higher premium income, a decrease in natural catastrophe losses and increased dividend and interest income. In the domestic life insurance business, net income decreased by JPY 74.9 billion year-on-year.

This was mainly due to Mitsui Sumitomo Aioi Life Insurance reporting a loss of JPY 51.9 billion as the company proceeded with the sale of yen-denominated loans in its available-for-sale securities portfolio to eliminate unrealized losses. Our overseas insurance subsidiaries recorded an increase in profit of JPY 77.4 billion, mainly attributable to higher revenues in Europe and the Americas as well as a decrease in natural catastrophe losses. Please turn to Page 13 for details on the group adjusted profit.

Driven by significant profit growth in both our domestic non-life insurance and international businesses, group adjusted profit increased by JPY 269.1 billion year-on-year, reaching a record JPY 1,000.9 billion. Next, please refer to Page 17 for an update on our ESR. As of the end of March 2026, ESR declined by 12 points from the previous fiscal year, standing at 214%. Now let me move on to our earnings forecast for fiscal year 2026.

As announced in our news release dated March 30, the company will voluntarily adopt IFRS for its consolidated financial statements, starting with the securities report for the fiscal year ended March 2026. Accordingly, please note that our earnings forecast for fiscal year 2026 are based on IFRS. Before presenting our earnings forecast for fiscal year 2026, let me first explain our fiscal 2025 results on an IFRS basis, which will serve as the basis for comparison.

Please turn to Page 14. While group adjusted profit under Japanese accounting standards was JPY 1,000.9 billion, adjusted profit on an IFRS basis was [ JPY 918.9 billion ]. This difference was mainly due to the recognition of losses on onerous contracts in the domestic non-life insurance business and the impact of eliminating timing differences resulting from the alignment of fiscal year-ends in overseas operations. Now let me explain our earnings forecast for fiscal year 2026.

Please refer to Page 30 of the presentation materials. As illustrated in this waterfall chart, we are forecasting adjusted profit of JPY 800 billion for the fiscal year ending March 2027. Excluding gains and losses from the sale of strategic equity holdings, we project adjusted profit from the domestic non-life insurance businesses to be JPY 170 billion, roughly in line with the previous year. This reflects our expectation of increased revenue offset by a projected rise in natural catastrophe losses.

For the domestic life insurance business, we expect adjusted profit to be JPY 52 billion, also roughly unchanged from the previous year. The positive impact from the absence of Mitsui Sumitomo Aioi Life Insurance's bond sales losses is expected to be mostly offset by a decline in investment margins at Mitsui Sumitomo Primary Life Insurance. For our international businesses, we are projecting adjusted profit of JPY 300 billion, an increase of approximately JPY 4 billion year-on-year.

While we anticipate natural catastrophe losses in Europe to be in line with the historical average and have factored in the absence of gains from the sale of shares in Challenger Limited in our overseas life insurance operations, we expect profit growth in the Americas primarily driven by equity and earnings from W.R. Berkley Corporation on balance. These factors result in a modest increase for the segment as a whole.

On a consolidated group basis, excluding gain from the sales of strategic equity holdings, we expect adjusted profit to be JPY 532 billion, remaining at the same level as the previous year. This forecast reflects the positive effects on ongoing initiatives such as rate revisions, while assuming natural catastrophe losses, both in Japan and overseas will be in line with historical averages. Finally, let me address our policy on shareholder return.

Page 8, please. For fiscal year 2025, in addition to the interim dividend of JPY 77.5 per share already paid, we will pay a year-end dividend of JPY 82.5 per share. This brings the total dividend to JPY 160 per share, representing an increase of JPY 15 compared to the previous fiscal year and JPY 5 compared to our initial forecast. In addition, we have decided to repurchase shares up to a maximum JPY 265 billion as part of our basic shareholder return policy, of which JPY 75 billion has already been executed.

Furthermore, for fiscal year 2026, we project an annual dividend of JPY 170 per share, which represents an increase of JPY 10 from the previous year. In addition to this, we plan to repurchase JPY 80 billion of our own shares during the first half as part of our basic shareholder return and combined with JPY 190 billion linked to the previous year's results, we intend to repurchase a total of JPY 270 billion worth of shares in fiscal year 2026. I'd also like to note that our growth strategy as well as topics such as the reduction of strategic equity holdings will be addressed in greater detail by management at the information meeting scheduled for next week on May 26. That concludes my remarks.

We will now begin the Q&A session. First of all, Sato-san, JPMorgan Securities, please.

This is Sato from JPMorgan. I have 2 questions. My first question is about international, especially MS Amlin and MS Re. The impact of the historical average, I'd like to learn about the attritional loss the project, excluding natural catastrophe. And I also would like to learn about the impact of the market softening. And my second question, so you have updated your midterm management plan. And I think basically, it is in line with what you have disclosed at information meeting. However, I'd like to learn about the points you have revised.

So thank you very much for your question. I'd like to double check your questions. Your first question was about Europe, especially MS Amlin and MS Re, excluding natural catastrophe. So what's the project -- or the projection of operational loss and also what was the impact of market softening? And your second question was about whether we have revised our midterm management plan. And if so, what are the points we have revised?

This is Nakayama from accounting. From myself, I'd like to address your first question. Regarding MS Amlin, FY '26 earnings forecast, which is on Page 50 and 51, we do have the earnings forecast of MS Amlin and MS Re. Starting from this time, as we have moved to IFRS for overseas subsidiaries, we are based on April to March. And regarding the previous year's number, the number of FY '25, it is also translated into April to March numbers. So that is why we do have some discrepancy with JGAAP-based numbers, which we do have at the later part of the presentation.

So again, this is April to March basis. And when you look at the loss ratio on Page 50 for MS Amlin, it's changed from 53.7% to 59.1%. And excluding natural catastrophe for MS Amlin, it was 1 point improvement. On the other hand, regarding MS Re, if you refer to Page 51, loss ratio has increased from 71% to 77.5%. And excluding natural catastrophe, there was -- excuse me, 3.7 point increase. So it was increased.

And this is the impact of market softening as well so that we have already incorporated the impact into these numbers. And excluding natural catastrophe for MS Re, it was 3.7 which looks actually bigger. However, there is the discount impact for IFRS and for FY '25, discount impact was bigger and also before FY '26, it is smaller. So that is why it looks like it has increased. So that's all from myself.

For your second question, this is Hayashi. I'm going to address your question. So today, at the timing of financial results announcement, we have presented our management plan. Last November, we have presented 2030 profit target. Based on IFRS, we have presented 764 billion. And now we do have the higher possibility to achieve this target for 2030 target. Even though we have presented it as JPY 700 billion, now we have increased the number to JPY 800 billion. And for other parts, including initiatives, we really haven't made major revisions.

And regarding my first question, the impact of market softening. According to what you have said regarding MS Amlin, it's improving and also for MS Re, there is the bigger -- the impact of the fluctuation. So even though there is an impact of market softening. However, you have been successfully managing that. Is that okay to understand that way?

Yes.

Mr. Muraki from SMBC Nikko Securities, please.

This is Muraki from SMBC Nikko Securities. I have 2 questions. My first question is regarding the projection of the auto and the insurance and how do you see the necessity to increase the premium. And on Page 21, there's a number based on Japanese standard. However, with IFRS, there is a projection of a 2-point improvement for automobiles. And I would like to learn more about the projection. That is my first question. And then my second question, when -- how we should see top line growth of MS Re and also the American companies?

So I think MS Re had a 15% growth of top line last year. And also the -- based on IFRS for the coming fiscal, the 15% growth is projected. However, there's companies such as Munich Re, which get higher impact of market softening and also they are experiencing reduction of revenues as well. My understanding is that you are strengthening your American base. However, there is less on the growth of top line in some companies. So there are some companies which are not really growing. However, I was wondering how I should interpret the 2-digit top line growth.

Let me confirm your question. Your first question was about FY '26, the auto insurance projection. And your second question was about MSV and also the Americas top line growth.

Regarding your first question, this is Nakayama speaking. Regarding FY '26 automobile projection, I would like you to refer to Page 38. As Mr. Muraki mentioned, we are projecting 2% improvement. Excluding natural catastrophes, there's the 4-point improvement. And as you may understand from PL, there is the impact from onerous contracts. That is why we are projecting a slight improvement. And we have been working on rate revisions. When we have apple-to-apple comparison, still, we are projecting improvement. And regarding rate revisions, I'd like to ask Mr. Hayashi to answer that point.

Regarding rate revisions, at this point in time, we have nothing finalized. However, as we have been explaining to you, the ratio we would like to achieve is the -- for the ratio we would like to achieve, we still have several things to consider.

May I move on to the next point. Regarding Page 38, loss ratio based on IFRS, there is the loss from the onerous contract of FY 2025. Are you saying that is it going to decrease in the coming fiscal?

Regarding onerous contract, there is the change of the estimate. However, for this time or in my answer, I included the natural catastrophe and also the onerous contract. However, still, we are projecting the improvement of the auto. So you can understand that it is improving even based on our traditional -- the Japanese base standard.

Let me move on to the second question, which is related to the top line. In 2026, the guidance is available on Page 49 for our international business. And as you are aware of, Europe, we're expecting JPY 169.9 billion revenue increase, which does include MS Amlin and Americas, JPY 155.5 billion revenue increase is including the United States. And MS Re, as Muraki-san is aware of, over the past several years, we've been able to keep growing the business, although the market has been softening.

And Munich Re, these insurance companies, they are directly affected by the softening situation. Their top line has been affected. But these reinsurance companies, these major-sized companies, their portfolios are being matured, I will say. But our business, MS Re, they are still under development. So the phases are different. Under such a circumstance, we can refer to the rate and we can choose the classes or lines with -- are not facing softening situation.

With that, we are aiming to further grow our business. So we've been growing until now. And even as of today, we are expecting to further grow our business. Reinsurance customers, we are being able to maintain good relationships that should be also enabling us to reach out to attractive contracts. That's another reason why we're being able to grow. We are not providing -- we are not competing based on pricing. That's not the case.

And the Americas. The Americas, yes, top line is growing. This JPY 155.5 number is there. And 2026 top line growth is affected a lot by the foreign currency exchange situation. If you look at Page 49, close to JPY 400 billion top line is growing, out of which foreign currency impact is equivalent to JPY 160 billion, which is included in this JPY 400 billion number. So if you do the math, maybe the actual growth is JPY 240 billion.

And as you know, if we switch over to FISS, the ordinary profit is going to be gross profit base. And we have a front retail business in the U.S. and they are going to enhance the new program. So on a gross basis, it may seem we are expanding a lot. But in terms of actional underwriting, the premium written, not necessarily. So top line growth, you see on Page 49. Again, that is incorporating foreign currency positive impact. That's it.

Next, Mizuho Securities, Sakamaki-san, please.

I am Sakamaki from Mizuho. My question is about your guidance. I have 2 questions. First, Page 30, waterfall chart, international business, Europe, Americas, life insurance, if we do the math, I don't think the number makes 39. What are the other factors you need to take into consideration? And the Americas WRB, what kind of contribution you're expecting?

And what is the organic growth you're expecting? My second question is about natural catastrophe impact. Now the accounting is going to be different, so it may be difficult to compare. But you are increasing your budget in Japan and maybe you are downsizing your budget in overseas. Am I correct?

Let us double check your questions. First is about Page 30 waterfall chart, the difference in the numbers for our overseas international business and [indiscernible] contribution. That was your first part of your question. And the second part is the impact coming from natural catastrophe, especially in the overseas markets. Mr. Nakayama will answer to the questions.

If we compare '25 and '26 on Page 30, the difference is 39. And if you also look at Page 48, you will see numbers by region. Americas, 615, international life insurance, 275. We also have Asia, minus 32 and other adjustments, which is minus 173. That should be the breakdown of the numbers.

I was missing this Page 48. Next, let us know about W.R. Berkeley situation.

WRB, if you look at Page 48, Americas plus 655 is including the equity method profit coming from W.R. Berkley as well. And this is a listed company, SEC, so we cannot mention the specific numbers. But again, certain number out of this JPY 65.5 billion is coming from W.R. Berkley. Again, they are listed in SEC. So there is market consensus number available. And we do not have any internal number. So we are based on the market consensus. I think we are incorporating like 15% of the market consensus. I think -- I hope I could answer your question.

Natural catastrophe per requisition, if you look at Slide #28, you will find left hand below domestic, JPY 150 billion and last year, JPY 124.7 billion. So we are expecting kind of a negative rebound following the previous fiscal year. Overseas, we're expecting JPY 64 billion for natural catastrophe. Last year, JPY 54.2 billion. We are not kind of being optimistic or under-evaluating the situation. We're just incorporating expected average situation.

When you switch over to IFRS basis, what is going to be the average year basis? Compared to JGAAP average year. For domestic business, can we expect the average base to be the same?

Shifting to IFRS, natural catastrophe assumption, we are not revisiting. So basically, the definition remains the same. Precisely speaking, IFRS, are we going to do some discount? Or is it going to be gross basis? What kind of risk factors? Theoretically speaking, these details may need to be considered. But if we are talking about natural catastrophe, it's not something we can kind of adjust.

So the definition is going to be the same. It's going to be net basis, Japan base. And we're just handling or treating the same as before. Of course, the bigger the company be, the natural catastrophe loss is going to be expanding. So depending on the scale, the size can be different or become bigger. Next, Daiwa Securities, Watanabe, please.

This question is related to the Middle East situation. The marine insurance with your domestic business, what kind of assumptions you have? And if you have already -- for the current fiscal year, are you expecting any negative impact? The second question is shareholder return. You have upward revised EPS expectation. And should we expect that the dividend increase speed is going to be faster in the future accordingly?

Let me confirm your questions. First is about the Middle East. What kind of impact are we expecting? Second question is related to the shareholder returns. Regarding your first question, Nakayama is going to answer. Regarding domestic insurance, we do see the limited impact. And regarding overseas, especially in Europe, MS Amlin or MS Re, for these companies, they do cover the Middle East.

However, as you understand or as you have pointed out, it's the accounting calendar results in March and April. And regarding Iran situation happened in February for certain exposures, we have already included loss then, so we have already included the loss for FY '25. And talking about Middle Eastern situation, which is quite unstable, we would like to be prepared to take a look at the short term, the impact and -- for CPI or for other economic index is now in the inflation trend, and we have already incorporated that impact into our numbers.

And when there's the -- we have not incorporated the impact of economic decline. However, in the beginning of April when Japan Bank has published a report, we have already included that impact. So in total, it's around JPY 30 billion of preparation, which we have already incorporated.

When you say JPY 30 billion, are you talking about FY '26 or FY '25?

Partially, the numbers is included for FY '26. However, for overseas business, which result in March or April, we do have numbers included for FY '25. And for domestic numbers, we have included these numbers for FY '26 according to our current plan.

And regarding your second question regarding shareholders' return, I would like to address your question. The shareholder return, we have already presented the improvement or the increase of the dividend. This is basically in line with our traditional shareholder return policy. And we have communicated that we are presenting the progressive on the dividend, but this is what we are considering for this fiscal and also for the next fiscal.

We really do not have the fixed numbers. However, we would like to present the progressive dividend and also we keep our basic shareholders' return policy, which is the 50%, and I would like [indiscernible] understanding on this. Mr. Mashima from Tokai Tokyo Intelligence Laboratory, please.

My first question on Page 32 for 2 non-life insurance company, there is the JPY 79 billion for merger expenses. And I'd like to know the breakdown, and I was wondering until when you are going to have merger expenses. That is my first question. Second question, when TaxiGo announced its listing, and I understand that the Aioi Nissay has the shares. And I was wondering if the sales of your share of TaxiGo is already included into the numbers. And is it included into your -- the performance of this fiscal regarding the bearing?

So for your question regarding merger expense and also your second question was about the taxi goal, the listing and also our gain from the sales of the shares and also you asked about the bearings company as well. This is Nakayama speaking. I'd like to answer your question regarding the merger expenses. Mr. Majima, you mentioned Page 32, which is JPY 79 billion as the merger expenses.

So this is the -- based on the IFRS 2026 before adjustment and also the after adjustment. And however, I'd like you to understand that this is the after-tax numbers. And when you go back to Page 28, as you can see, major assumptions for earnings forecast, JPY 111 billion, this is the number that we have for FY '26. And there is the increase of the JPY 68.5 billion, meaning that for FY '25, it was JPY 42.5 billion. And for FY '26, it is JPY 111 billion.

And for merger expenses, the merger is scheduled at the April 1, 2027, and we are projecting that there will be some numbers for FY '27 as well. So we are projecting that we do have numbers from FY '25, '26 and '27 for the 3 years. However, the major numbers, they're coming from this fiscal year. So that was about the merger expenses. And did you also ask about breakdown? The biggest portion is coming from the system integration.

So major part of the expenses is actually coming from the system integration and also there is the integration of the locations, which we are having mainly in FY '26. So these are major expenses. And your second question, which was about TaxiGo IPO-related gain, is it included in these numbers. So for the AD and also the MS, we would like to refrain from the answering which the shares we have sold.

And how about bearings? We being a bearing company. This is financial and related services, meaning for FY '26, I'd like you to refer to the numbers by categories and there's JPY 10 billion, which is for the financial services and also there is the social challenges related to businesses as well. So the numbers are included here. However, for specific numbers, as [indiscernible] is not a listed company, I would like to refrain from answering specific numbers related to this.

Next, Tsujino-san from BofA Securities.

I have 2 questions. You have made the announcement of the share buyback, which is around JPY 190 billion. Is it for the second half of the FY '26 and also the -- for this year's numbers. So that is JPY 190 billion. And also, there is another announcement possibly you're going to make in November. So that is why you're saying that it will be JPY 270 billion in total for 2026. And as for the physical number, the number from the second half will be incorporated for your -- the financial result announcement, which you are going to have probably around the same time next year. That is my first question.

So I think your question was about share buyback.

Let me answer. Yes, what you explained right now sounds correct. First of all, JPY 190 billion. This was for second half 2025 and JPY 80 billion is for 2026, first half or in the middle. And in total, 2026, we are expecting JPY 270 billion. So sometime this time around next year, separately, depending on the adjusted profit expected, we may announce additional share buyback. That's it.

So JPY 80 billion we're expecting now is kind of additional share buyback, maybe 50% of the profit, excluding the capital level adjustment you're talking about.

No, this JPY 80 billion is reflecting the basic shareholder return.

For the full year?

Half of the full year.

Second question is the middle -- midterm plan you're also announcing. And in 2030, your adjusted profit target is JPY 800 billion. And last year in November at the explanatory session, the adjusted profit based on IFRS and JGAAP, there were 2 different numbers. And one of them was like around JPY 750 billion.

Another one was like JPY 760 billion or so. And now the number is becoming bigger. Is that because just you're rounding up the number or is there any specific reasons why now the profit you're expecting -- adjusted profit you're expecting is not JPY 750 billion or JPY 760 billion, but JPY 800 million. Is it foreign currency exchange?

Well, the business management plan we are announcing, the number is what you're asking for. As we explained at the beginning, the numbers we were announcing in November, we've been revisiting or scrutinizing. So now the probability of achieving numbers are becoming higher. So now we are adding up more probable numbers, and we are saying JPY 800 billion. It's not like rounding up JPY 750 billion or JPY 760 billion. We just scrutinize all of the business expected adjusted profit and accumulated.

So there's no specific business which is likely to perform much stronger than what you were expecting in November.

Well, international business, yes, is contributing a lot for the difference between now and November. Next, Sasaki from Nomura Securities, please.

I am Sasaki from Nomura Securities. I have one question. Strategic equity holding, I think this year, the outstanding balance is going to be much lower than last year. Is this number -- expected number going to be -- can this number become different at the end of the day because the trend can become even stronger to unwind the cross-shareholding or strategic equity holding. If that's the case, can this number actually become larger than what you're expecting for at this moment?

It's about how much we are planning to downsize our strategic equity holding. I am Nakayama. I will answer to your question. Well, the thinking we have is as we've been explaining, as you see on Page 28, this year, we're expecting JPY 476.3 billion. Last year was JPY 701 billion. So we're expecting more than JPY 200 billion decrease.

Well, we've been decreasing already a lot and the yen has been weakening. So based on these assumptions, we have this plan. And we believe this JPY 476.3 billion is a highly probable number. But of course, during the fiscal year, anything can happen. So the actual number can become higher or lower compared to this number.

Any other questions? If not, we'd like to close the session. If there are any questions we could not take during the question, please feel free to ask our IR department. We will individually respond to your questions. This concludes today's conference call. We appreciate your continued support and understanding. Thank you very much for joining our earnings conference call today. Thank you...

Good afternoon, ladies and gentlemen. Thank you very much for participating in the MS&AD Insurance Group Holdings Fiscal Year 2025 Second Information Meeting today. I am Hayashi from the IR department, and I will serve as a host and moderator. Thank you for your attention.

Before we begin, I'd like to provide guidance regarding the audio and materials. The original audio will be in Japanese. [Operator Instructions]

Today's materials are available on our official website. Please select Investor Relations and IR Events from the top screen and view the section Fiscal Year 2025 Second Information Meeting. Also, I would like to apologize and inform you about correction to the materials.

We have added 2 details in the latest version of the materials published on the official website this afternoon. The revised version has been distributed to those participating in the venue and the materials currently on the official website for those participating online are the correct ones. So please check them.

The first correction is on Page 21, where information about the revision planned for January 2026 has been added to the graph on the left side for voluntary automobile insurance. The second correction is on Page 20-22, where the expression, introduction and operation of early retirement support system has been added to the personnel cost section within the box on the right side.

Now I'd like to introduce our attendees. President and Group CEO; Shinichiro Funabiki. Next, from the left, Executive Officer in charge of Asset Management and Financial Services business, Takuma Hayakawa; Senior Executive Officer and Group CRO, Satoru Tamura; Vice President, Executive Officer and Group CFO, Shigeo Kudo; Executive Officer in charge of International Business Planning Department, Hironori Morimoto. Today, first, we'll have a presentation by President, Funabiki, for about 15 to 20 minutes based on the materials.

For questions, we will have a Q&A session for approximately 60 minutes following the presentation ending around 5:30 p.m.

Now let's move on to the presentation. Mr. Funabiki, the floor is yours.

Hello, everyone. My name is Funabiki. I'm the CEO of MS&AD Holdings. Today -- So this year, so we have announced the merger of MS&AD and also we have made a release on our investment into W.R. Berkley. And quite recently, so we have made a release on our investment to Barings. So quite a number of significant events for the group.

So through these initiatives, I'm going to show you, through these initiatives, how would the group look like in the future, especially by the end of 2029, we are going to complete the unwinding of strategic shareholdings. I would like to focus my point on that point today.

Please take a look at Page 4. So as announced in the news release at the end of September, the 2 core non-life insurance companies will merge in April 2027 to become Mitsui Sumitomo Aioi Insurance. At the same time, the group name will be changed to Mitsui Sumitomo Insurance Group from the current name, MS&AD Insurance Holdings.

So the Holdings will change its name as well. And so the group brand will be this kind of green and the letter, the character would be white. So these are our corporate color.

Quantitative target. So after any sell-down of cross shareholding, we would like to keep the same level of the profit.

Right now, we are using group adjusted profit. So we want to retain or maintain over JPY 700 billion adjusted profit in 2030, after we have completely sold down strategic shareholdings. We are reborn as new group. So -- and the tagline -- the new tagline that represents our management philosophy and style Is taking on risk, leading the world. So we have focused -- we will focus on serving the mission as an insurance company. And we will be the most chosen, the top choice insurance group, both in Japan and globally. So that's what we have embodied in the tagline.

And we have a concept video which talks about this new corporate philosophy.

[Presentation]

So we wanted to show our determination in this video. Now please take a look at Page 7. So as an approach to realizing the profit target for the fiscal year 2030, we have been discussing management plans and KPIs internally among the management members. In the first information meeting in May, I said that we would formulate a 3-year medium-term management plan starting from the fiscal year 2027 after the non-life insurance merger.

Having said that, we have decided not to formulate a so-called medium-term management plan going forward. The reason is that rapid changes in internal environment, including and especially the merger and external environments such as regulations and industry rules are expected.

So it has rapidly changed, and it is going to continue to change rapidly. So we believe that making swift and flexible management decisions while looking towards the fiscal year 2030 and accumulating single year plans will ultimately increase the certainty of achieving the fiscal year 2030 targets.

Of course, we will present I mean our -- I guess, the big picture of how we are going to get and achieve 2030 targets. So in the future, so we will focus on single year plan to make a flexible and swift decision-making, and we need to reflect that -- continue to reflect that onto our plan and present that to you, the investors. So that's our focus.

So additionally, our KPIs will be reviewed with the introduction of IFRS at the end of this fiscal year. Adjusted profit and adjusted ROE will not undergo significant changes in their fundamental concepts compared to the current J-GAAP basis despite accounting standard differences.

Definitions of these are provided on Page 8, but the detailed explanation will be presented at the IFRS introduction briefing scheduled on December 17. Plus, we have decided to add EPS growth rate as a new KPI. We will further enhance our awareness of maximizing corporate value and capital efficiency while conducting business operations. So again, that's a commitment that I'd like to make to all of you.

The EPS from core business, excluding the gain from strategic equity holdings sell-down is projected to grow approximately 17% between fiscal year 2026 and fiscal year 2030. There are also changes regarding ESR, which I will be talking about that later on Page 13.

So regarding the profit outlook towards fiscal year 2030, Page 9 shows the current group adjusted profit base and Page 10 shows the number in terms of IFRS after we have adopted IFRS.

As you can see, there is no significant difference in the numbers in these 2 pages. In either case, by 2030, so driven by both in domestic non-life insurance and international business, we are very much confident that we can get to JPY 700 billion adjusted profit.

The profit growth rate, excluding strategic equity holdings sell-down is expected to be around 15%. Sales of strategic equity holdings, decisions will be made comprehensively considering the market environment and merger cost situations. But given the current share market situation, I think there's a good possibility that we can expedite the process of front load, the completion of the strategic share sell-down.

Page 11 summarizes the structure for achieving the fiscal year 2030 profit of JPY 700 billion and efforts towards reaching JPY 1 trillion. The 3 major topics or initiatives. I will explain shortly. So again, so the cost reduction, cost synergy after MS&AD integration, JPY 150 billion upside. Synergy through partnership with W.R. Berkley, we are expecting JPY 100 billion contribution.

And our investment into Barings, we are expecting additional profit of JPY 75 billion. So they add up to JPY 3,250 billion. And I mean, these 3 factors alone has this much contribution. So we are confident that we can achieve JPY 300 billion. And of course, there are contributions from other initiatives as well.

Moving on, please turn to Page 12. So our track record and future outlook for both EPS and DPS. So we have achieved over 15% growth in EPS historically. And moving towards fiscal year 2030, we are expecting to expedite the growth.

I mean so including the control of number of shares outstanding. Now if you look at EPS, by the end of this fiscal year, we had 13 consecutive years increase in dividend. So, I mean, so we will focus on highest dividend as the highest value, best means of providing returns to our shareholders.

Page 13. So after the introduction of IFRS, there will be no changes in the basic return policies such as maintaining a total return ratio of 50% and adopting progressive increase in the dividend as a principle. However, we decided to remove the upper limit of ESR. So, I mean, there is going to be some change in how we provide guideline to providing additional shareholders.

So that's explained on Page 14. So as mentioned earlier, so the gain from strategic shareholding -- selling of strategic shareholding, we would like to appropriate that, use that money on investment for further growth. So we used to have 250% cap on the ESR, but with the investment into W.R. Berkley and Barings, I think we have completed a round of investment for growth.

So how are we going to perceive 250%? Or are we going to bring that down to 220%? So there's going to be a lot of changes, I mean, in the market or in the regulation.

So bringing -- I mean, adjusting up and down the upper limit to 250% or 220%, is it really the best approach. So I mean, so ESR is a KPI that represents the soundness of our financials, yes. So in that sense, we are going to continue to hold the floor 180%.

And so it has served as sort of a guideline or the threshold for additional investor return. So we will need to be creative in how we communicate this well to investors. So of course, I mean, we will be very flexible in managing our capital allocation.

And with that, so if you can take a look at Page 16 or 14 on the right side. So it shows the framework of our shareholder return. So we are going to draw a line, so that you could have a pretty good idea on when and how much we are going to provide return to our shareholders. So I mean so we have, for instance, I mean, appropriated the proceeds from Challenger sell-down and appropriated that to shareholder return. So we did remove the upper limit, but we have not changed ourselves in providing proactive return to our shareholders.

Please turn to Page 15. I'd like to talk about the situation around strategic shareholder holdings sell-down. So in the first half, it has progressed quite solidly, but Nikkei average has significantly spiked since end of March. So we have worked down the balance through the sell-down.

But on a market cap basis, I mean, the balance has shown a flat decline remaining at JPY 2.3 trillion because of the valuation enhancement. So if you look into the decision, so we are going to enjoy more capital gain in the future.

So that's a virtue, but we have this much balance. So we need to look into the market, our cost of PMI measure. We will need to determine the pace of the future sell-down of strategic shareholder -- shareholding. And we are going to reflect that to next fiscal year's plan.

Now please take a look at Page 16. So our investment for growth, like I mentioned, so we have invested into W.R. Berkley, and we have invested into Barings. So that's completion of a round of significant business investment. So now I mean, we are going into a phase where we will be harvesting the fruit of these big investments.

Of course, in order for us to continuously grow the business, we need to continuously look for this type of opportunity. So we are going to see the balance of investment and return and in light of further meeting expectation of our investors and shareholders.

Now I would like to discuss the concrete actions for each business to achieve profit targets for year 2030. Regarding domestic P&C business, you can find the time line for the merger in Page 18. Regarding growth strategy after the merger of the 2 companies, you can find from Page 19 onwards.

Upon merger, generally speaking, risk factors are set to be system integration. But for our group, in integrating system, right and smooth integration approach was defined in terms of the capacity. We set a very clear capacity. And within that capacity, the system can be managed. The business divisions are in alignment about this, so that we have confidence to be successful.

The next page -- there are several major changes that we expect to see happen in domestic P&C business. There are mainly 3 of them.

First customer-oriented operation of duties, which is enhanced comparative recommendation sales. This is an important factor to affect the model of our business. And in the commercial line, there would be evolution of the transitional measures for the designated contract ratio.

And this is going to bring a major change in running a business, which has been oriented in agency channels or in-house agency channels. So this is going to bring a significant change.

Of course, big premises are that right marketing and production structure has been established for the customers. So together with the agencies, right operations must be implemented by setting up the right structure. This is a very important focus that we are going to make.

In this context, insurance companies and agencies have to restructure ourselves and [ bridging ] ourselves. This is going to be a very important theme for this year and next year. So how to manage risk and how to deliver products that are going to meet the expectation and needs of our customers. This is going to be the refocus areas for us. One typical example is shown here, bank agency and our own direct agency are to be merged to set up a joint venture so that we are going to keep the level that are expected by our commercial clients. So this is one of the efforts that we pursue most recently.

And then on Slide 21, this slide talks about auto and fire profitability improvement and also the rate revisions for that purpose. In both lines of business, for auto in a short-term cycle, 95% combined ratio.

For fire, in the conventional setting, in 10-year major cuts, how we can absorb such losses to come up with 95% combined ratio. So those are the key factors to design pricing conventionally. But unfortunately, today, those levels are not met yet.

Therefore, expense reduction is where we put our utmost effort whilst we also continue to revise and adjust our premium rate, which we have been done and which we are going to do.

More specifically, both in auto and fire, we need to reflect inflation and also more frequent and more intensified NatCats. And based on adviser rates, we are going to also set up our own projection of the market so that we would be proactively revising our premium rates.

As a result of those endeavors, right now, combined ratios are improving, but we need to continue to make revisions until we reach the most appropriate levels, mostly driven by the rate revisions. Page 22 talks about our outlook for expense ratio.

By fiscal year 2030, we expect to reduce personnel expenses, agency commissions and non-personnel expenses by JPY 50 billion, respectively. In terms of expense allocation, it's quite comparable to this portfolio. So just proportionately, we expect such reduction benefits. Starting on personnel expenses, MS&AD together after merger, there would be a total of about 34,000 employees.

And within our group, it's skewed more toward a high age population of employees. Therefore, by 2030, as a result of natural attrition and as a result of merger, restricted or restrained hiring would lead to the total number of employees to be under 30,000 by year 2030.

Then by offering a variety of options to our employees, we are going to make sure that our employees are going to be able to make the best choice for them by way of providing early retirement support system.

So all in all, we have certainty about hitting the target of the total number of employees under 30,000 and also reduce the cost by JPY 50 billion. And then we expect the same level of reduction from agency commissions and also non-personnel expenses.

Regarding non-personnel expenses, system development operation costs are key drivers. But by benefit of merger, we expect significant reduction in non-personnel expenses so that in fiscal year 2030, we expect expense ratio to be well under 30% for -- with good visibility. Our target rate of expense ratio is 29.6% in FY 2030. Then, I want to move my attention to international business.

Please see Page 23. International business is a major driver to drive our growth. And in FY 2030, we expect group adjusted profit of JPY 420 billion to be generated from International business.

We have confidence about this projection backed by the turnaround of Amlin. As for Amlin entities, they are directly to MSI for the purpose of enhancing governance. Then we assigned the leader who has experience as CEO to become CEOs of Amlin companies so that we were able to secure talent. And also as a result of this leadership team, we are able to enhance a disciplined underwriting such as cycle management to deliver strong results.

So we are very proud of this achievement that we have so far accomplished and insight and capabilities that we have earned are reflected in our American business, where we started to expand local business in earnest and put the American business on track for the growth, as you can find here.

Then now we have alliance and partnership with the founding family of W.R. Berkley that has excellent and also outstanding underwriting capabilities. And we were able to actually achieve this partnership based on insight and capabilities that have been accumulated.

So we have a good confidence about achieving JPY 420 billion hurdle that we set. And now I want to talk more about this partnership with the W.R. Berkley funding family. So I talked about JPY 100 billion target profit.

But for us, of course, after enjoying the equity gains, the Berkley's profitable portfolio and also reinsurance transaction is where we want to take priority for underwriting.

And then within our group, we have production bases in Japan and Asia that can be leveraged to introduce W.R. Berkley's underwriting resources and also expand specialty insurance market in those regions so that can lead to a growth in our profit.

In America, as a foreign non-life player, our ambition is to become one of the top tier players. Upon this, together with the founding family of W.R.Berkley by joining business together. And through the collaboration work with them, we are going to build up our trust-based relationship.

And as a result of that, we are going to see new prospects and also options to be taken by the 2 companies. And more than anything, our track record from our activities and by collaborating with W.R. Berkley, I'm sure that W.R. Berkley is going to have more -- find more value and trust on us, and that should be beneficial in a mutual and reciprocal manner going forward.

Then on Page 25, there is an explanation about the governance that we are going to establish to manage our international business. In managing the international businesses, upon merger of MS&AD, the International business structure is going to be led by the holding company. And as a holding company, we will be promoting a multinational talent so that we are going to be sophisticating ourselves as a global holding company.

So with this enhancement of the organization structure, we are going to expand underwriting culture and also capital allocation, strategic planning and risk management. We make sure that this strategy and practice are going to be expanded across our regions in a very effective manner.

And so that there would be even higher visibility in hitting the profit target and enhancing our risk management capabilities. My next topic is on Page 26, regarding asset management. There are some changes in our environment and the key challenges that we face today.

And that is concerning our growing International business and also another focus business with life insurance and the challenge is to enhance product competitiveness and also enhance capital efficiency.

Even until now, we have been enhancing our operational structure in a global scale. But in order to address those challenges that I just mentioned, we have made a decision to invest in the Barings, which is 100% subsidiary of MassMutual, which is a major player in the U.S. and pursue partnership. In addition to that, research to capitalize on Martello Re, which has a very deep relationship with MassMutual and the Barings.

As a result, as you can find, we can enhance our operation of foreign credits and enhance product competitiveness for life insurance and also sophisticate our risk control capabilities. So those focus areas that we would like to enhance are going to be enhanced as a result of this investment.

And this is a conceptual chart of the objective and the goal of this investment and partnership, as you can find in Page 27. Barings has a very strong operational capability and management capability to manage public and private credits according to our own assessment.

And affiliate company, Martello Re, is a insurance company with a very strong credit worthiness. As you can find in this slide, by investing in Barings and also by allocating capital by way of seed capital investment and investment mandate, we are able to enjoy high dividend and a stable investment management return. And also by making use of reinsurance, we are able to control risk in an appropriate manner. So this is a structure which enables the capital cycle management, which is part of our management strategy.

As a result of that, on Page 28, you can find the expected earnings. As a result of this partnership with Barings, we expect the total earnings is going to amount JPY 140 billion.

And the additional earnings, which would not have been achieved without this partnership is estimated to be JPY 75 billion. Finally, I want to talk about shareholder returns based on the recent half year results.

Please see Slide 33. Our interim dividend is JPY 77.5, which is JPY 5 increase year-over-year. And our estimate and guidance for full year dividend is JPY 155, which is JPY 10 increase year-over-year.

Regarding share buyback, the basic return is JPY 75 billion. And in addition, the additional return, which is covered by the capital gains from Challenger is JPY 60 billion.

As a result, by adding JPY 85 billion from year-end fiscal 2024, the amount of buyback in fiscal '25 is going to be JPY 220 billion.

In May meeting, our guidance was JPY 200 billion, but as a result of upward revision of the full year guidance, now it's JPY 20 billion higher by original guidance. This concludes my presentation. And I will -- and we are going to continue to drive our growth and also shareholder return to meet the expectation of the shareholders and our investors.

Thank you very much for your kind attention.

Thank you very much, Mr. Funabiki. Before going into Q&A, I would like to make a housekeeping announcement. Today, media representatives are also present. However, we can only accept questions from investors and analysts, our apologies. We kindly ask the media representatives to refrain from asking questions. [Operator Instructions]

First, Kazuki Watanabe, from Daiwa Securities.

This is Watanabe speaking from Daiwa Securities. So I have 2 questions. First, so Page 7 of the presentation, so EPS growth. So you mentioned 16.8%, excluding the gains from strategic shareholding sell-downs.

So can we expect increase in EPS for the single year? And 13.7% growth rate, which you have made. So what is the reason for 3.1% gap? Is it because of the deduction in number of outstanding share because of share buyback?

And so Page 14, so capital allocation. So you talked about ESR capital policy. So you have talked about removing the upper limit. So if you are over X percent, sorry, the audio went off. So what is your thought on additional -- what level of ESR to start providing additional returns to the shareholders?

The first question, the numbers. So focusing on Page 20-30, our plan that we have presented. So we are going to have an incremental growth and sell-down of strategic shareholding. So I mean that it's going to fluctuate because of the market. So there is going to be some ups and down. So -- and if you look at our overseas business, so we will start seeing the fruit of the investment, not in a straight line, but more -- I mean the speed with growth towards the later years.

So probably towards the end of the years until 2030, we are going to see the growth pace pick up -- speed up.

And so I will answer the second part of your question. So like you have pointed out, so the share buyback will be -- yes, it is a very big factor, which is going to reduce the number of outstanding shares for our group.

So yes, he answered the question. So [ 250 ] -- so that was -- we were thinking of the investment into W.R.Berkley and Barings. So of course, we are going to flexibly capture these opportunities. But until -- so we are going to be effected to our capital structure.

So we need to start focusing on that. So -- but ESR, if you just focus on ESR, so it is coming down. So we need to look into what is the optimal standard from which we can start, I mean, implementing share buyback. So we are finalizing the decision. So the started line, I mean, on the left side comes down on the right side. So that's the implication. So that's, I guess, our decision. Thank you very much.

Muraki from SMBC Nikko Securities.

I'm Muraki from SMBC Nikko. I have 2 questions. First question is on ESR. September 8, 234%. And on Page 16, so you are done with major investment cycle and you have determined where to allocate capital elsewhere, roughly speaking.

So all in all, what would be the pro forma ESR based on all those factors included? And W.R.Berkley and Barings together 15 to 20 points, then it would probably bring it down to 220%, then JPY 2.3 trillion is not going to go down to 0.

Then JPY 0.8 trillion for pure investment and JPY 350 billion. So net basis, I think there would be a less management risk. So all in all, what would have been the ESR level? That's my first question.

And my second question is regarding domestic business. Within the presentation, in 1 to 2 years' time, the key topics are going to be evolution of competitive recommendation sales and also the distribution channel transformation, which is today driven by agencies.

But at the same time, in the next 1 year, you need to work on the merger of 2 commodities. So you have 2 major tasks to conduct simultaneously. So today, what do you think are the barriers or difficulties or challenges in pursuit of those 2 major tasks? Then what would be the potential after completing those major tasks?

Thank you for your questions. Without detailed numbers -- and there will be some time deferrals as well. So I'm not going to give you detailed numbers, but regarding W.R. Berkley and Barings, 20 points reduction by those 2 investments and the investments elsewhere or risk taking elsewhere and also fund moving out or flowing in. All in all, I would say 20 points or so, a little over 20 points are the magnitude of ESR decrease as of end of this fiscal year.

Fine with the first question. Regarding this first point, then maybe you cannot tell me, but investments in W.R.Berkley, if you have already made progress, then that should have been reflected in ESR as of September 8, but the gap is to 20 points.

And regarding the investment side, am I correct? You reduced Japanese equities quite substantially, then JPY 350 billion increase in the credit investment, then investment risk is going to be lower. Is this correct understanding?

Thank you. Regarding the W.R. Berkley, I cannot give you much details today, but we have been making progress regarding investing in it. So that is partly accounted for. And regarding the second point on asset management side, investment side, overall understanding that you gave me is correct.

But in asset management, there are many investments, not substantially large risk, but there are foreign exchange rate risks, then we invest overseas as well.

So within our current estimation, all inclusive of the elements, the level that we expect in ESR is the one that I just told you.

Regarding W.R. Berkley, as you said, as we acquire foreign equities, for half year, it's down by several points. And after investment is complete, goodwill is going to be recognized. And that means that there will be further reduction in ESR as of end of the year. I cannot give you a specific figure now, but it's going to be slightly over 200%.

Regarding the second point, simultaneous 2 tasks, both the merger and regulation -- regulatory affairs, we are merging 2 companies which are already part of our group. It's different from a pure merger of the 2 companies of which capital base is different. So I think the burden is lighter compared to such a more conventional merger. The system is where the management of risk is more important.

As I explained earlier. But aside from that, we know each other already between the 2 companies, and we visit each other's offices, and we see a very similar product lines. So compared to a conventional merger of 2 strangers, I think we are in a more fortunate position to pursue merger.

And regarding the change of the regulatory rules, of course, there are some preparation to be made at head office, but the front line, the employees working at front lines have to do the most of the work. And we want to minimize the burden on those frontline employees concerning the merger. So more strict the comparative sales.

And regarding the abolishment of the intermediate measures with or without the merger, we have enough time and resources to work on those regulatory changes. And as we are going to be larger in size, both in qualitative and quantitative manners, we are now stepping up to a more advantageous position. So this merger is more of a tailwind for us. And even where the changes are required in the regulatory environment, I think it's possible to pursue a strong approach. So the benefit of merger, in our view, is greater than the burden and the workload that we have to bear. And as a result, that is going to create even greater value to customers. So this kind of purchase cycle is we are achieving now.

Next question from JPMorgan, Sato-san.

This is Sato speaking from JPMorgan. I have 2 questions as well. One, Page 11. So the factors driving profit increase up until 2030. So that's what this slide is presenting. So if this convinces the market, your share price will surely go up. So in order for us to really enhance the conviction, so the 2 upside from the over 2 overseas investment, I would like you to elaborate on how we are going to get to these numbers.

So we have made altogether JPY 800 billion investor and 20% -- over 20% return after 5 years. So Tokio Marine, I think the other day in their IR presentation -- in their presentation, they had -- they present a similar return for their overseas investment. So they have done 5 M&A altogether, 22% aggregate. So your company is expecting very high return compared to that in 5 years.

So what is the ground for doing that? So what is the -- I guess, what is the differentiation that you have that is going to achieve such high level of growth? Can you elaborate on that point? So that's my first question.

Second question is on Page 15. So the future unwinding of the strategic shareholding. On the right side, so you talk about -- so you have the stability of adjusted profit and stock market conditions, and that's how you're going to determine the pace, page 15 and expected cost of integration.

So March '26, so you're going to have a balance of [ JPY 2.1 trillion ] of which JPY 100 billion -- JPY 800 billion is pure investment. So if you're going to leave that amount, so probably -- so you have to further unwind JPY 1.3 trillion over 4 years. So that will be JPY 300 billion a year if we make the division.

So next fiscal year, I mean if I do the math, so we are going to have quite a reduction in the amount of unwinding you're going to do. So are you going to have -- so if you can realize profit, so are we going to -- so is this -- are you saying stability of adjusted profit in a sense to normalize the pace of unwinding?

So because you have been focusing on whatever you can sell early and you have been selling. So probably, as you go down the process, there are a lot of shares for which unwinding and negotiating for unwinding is very difficult. Given that situation, is it further going to contribute to stability of adjusted profit? Is it possible for you to keep the pace of unwinding?

The first point, Page 11. So the structure for achieving -- so the probability or I guess, how realistic these I mean, numbers upsides are. Cost reduction, like I have mentioned earlier, we have a very solid outlook for achieving this much cost reduction, the first point.

So the partnership and synergy with W.R. Berkley. So we have experience in recovering MS Amlin. And so we have experience in solidly growing MS&AD in U.S.A. So why we were able to do that? So we have people, talent. And so we are leveraging the talent in the -- our strategy. So people, so underwriting capability of our people which meets our risk appetite. So we were able to recruit the right underwriters, talented right underwriters. And these talents, so the market cycle, so going soft, going hard.

So the CEO needs to recruit the right underwriter team that meets the situation. We have successfully -- we have successfully done that. That's why we are recovering these businesses. So looking into this market cycle, so there are concepts for underwriting.

So a partnership between W.R. Berkley and MSIG is very -- will be very strong because we have very similar concept and philosophy. So we don't have to start from understanding each other. So we have had a negotiation for a few years.

We have a very deep understanding -- mutual understanding. So that's why we can start right away. So how we can make development in Asia. We already are on the same page. So we talked about reinsurance. So if you start from confirming risk appetite, so I mean, how much we can underwrite, how much we can profit, we don't have -- we are not on the same page. But us and W.R. Berkley are already on the same page in regards to such goal. So additional expected return from investment into Barings.

So what is -- so what is the differentiator, which allows us to achieve the growth higher than our peers? So because we have MS Primary in our group, and we have been managing MS Primary, that I mean matches the structure, and it's easier for us to gain results.

So high operating productivity, we can reflect that onto our rate price, so we can offer a more competitive product from the pricing perspective. So that's a virtuous cycle that we enjoy. So this is something that only MS&AD are capable of doing among all the Japanese insurance companies.

And do you have anything to add?

So -- and strategic shareholders. So up until 2029, we want to stabilize our adjusted profit. And in order for us to achieve progressive increase in dividend. So what should be the timing of unwinding, what brand or which share do you want to release? I mean we have story and scenario for designing that. And now we have a merger, which is a costly initiative.

And so -- and given the relatively high, I mean, share price average. So these are the moving factors, which would determine our tactics or strategy for further unwinding.

So if you look at this fiscal year's profit, and let's say, so what is the profit of evenly distributing the unwinding to the remaining fiscal years. So having more percentage of share being unwinded next year, yes, maybe we would probably opt to do that.

And -- but by doing so, we will need to prevent fluctuation in our bottom line. So we have been negotiating with the issuers of our strategic shareholders, and we want to, I guess, continue to achieve the result based on our communication with the issuers of our current strategic shareholders. Thank you very much, Sato-san.

So next Takemura from Morgan Stanley.

I'm Takemura from Morgan Stanley MUFG. My question concern numbers. I know that you're going to have a different session in IFRS, but I have some questions that I wanted to ask this time.

One of them is IFRS profit and JGAAP profit levels have some difference. So how should I be thinking about them? So on Slide 9 and 10, if you make a comparison, roughly very similar levels. In the previous explanation policy and also market valuation of liabilities a difference of JPY 100 billion. So how would you explain that?

And together, on the second point, regarding IFRS basis, current ROE is going to be what level? I would like to have some image about this. And for example, IFRS basis adjusted net asset level and also from this adjusted net asset value, you also subtract intangible asset. So I'd like to see the size of it, roughly speaking. So my question in a nutshell is the level of ROE.

So 14.9% and 12.4% ROE numbers difference regarding that first point. Catastrophe reserve liability to asset transfer is what we are looking at, but the details probably can be explained by Kudo-san.

First of all, regarding this difference, JPY 100 billion, as you mentioned, for P&C side, the difference is mostly these onerous policies. And then regarding Life side, as possible, the gains from strategic equity sales were adjusted. And on the cash, we also wanted to make it a cash basis. So for the new business for life, the impact is pretty large, but we made some adjustment on this so that as we compared to the previous explanation, there has been some compression.

IFRS basis adjusted profit current ROE, the number I have is that [ 13.5% ] outlook for FY '25 end. And in compared to year '30 -- fiscal year 2030, probably liabilities calculation would increase the net asset in the future. But I don't have denominator numerator at hand. So I would like to explain it in a different occasion.

Then regarding the difference, one big factor is we adjust and exclude the market fluctuation factor to see consistency.

Maybe not directly related to your question, but ROE that is on Page 9, 14.9% and Page 10, 12.4%. Those are JPY 700 billion profit is based on our confidence to achieve. And based on this confidence, we came up with this number. So this is not stretched the upper end numbers, but this is the minimum number that we are to see.

Next from UBS, Niwa-san.

This is Niwa speaking from UBS Securities. So the profit until 2030, the profit and ROE and the overseas strategy, I have a strategy on your -- I have a question on your overseas strategy. So I'm trying to -- yes, really understand Page 10 and Page 11.

So given your comment, so IFRS space, so JPY 760 billion is, I mean, very solid target, very probable target. But -- so ROE of 12%, 13%, I think that's not a very high bar you're setting. It's a bit low. So I mean, what's the distance between JPY 1 trillion and JPY 700 billion? So if you can give us the color, probably that would give us a better understanding.

So are we talking about excessive capital which is assumption behind ROE? Or I mean are you aiming for upside? So what's the color here on your ROE target? And the second question is on Page 24. So your target for overseas business. So in U.S. market, you want to be a top-tier foreign affiliated non-life insurance. I'm having a difficulty, I guess, understanding that concept.

So are you going to -- I mean taking all of the returns from investors or investment? Well it's not a specialty insurance that you'll be going for. You're going widely on commercial insurance. Are you going to -- is your underwriting appetite like that? So I think this is -- this seems to me like a very big ambition. So what is your idea on the strategy for your overseas business?

Your first question, so ROE target setting. So our adjusted profit target, which is -- we are very confident, so JPY 764 billion. So ROE, assuming JPY 764 billion adjusted profit is 12.4%. So again, I said our focus is more on JPY 764 billion. So if you automatically calculate our ROE from that level of adjusted profit, it's 12.4%.

So I mean, how are we going to drive our management effort to further, I mean, boost or enhance ROE. So that will be our fine-tuning of our business plan from next fiscal year onward, how far we can go.

12.4% -- so it's like an accessory figure from JPY 764 billion. It's an automatic calculation from JPY 764 billion. So we will need to look at the equation, both the denominator and numerators, of course, I mean design different initiatives that you can see in the future. Now so overseas -- in overseas, I mean, we want to be top-tier foreign nonlife insurer.

Morimoto-san can further talk about this. So we have been focusing on business with Japanese clients, Japanese JIA. And so that's the past. So building on insight from Amlin, so we have explored into commercial insurance in U.S. So we are now widely approaching commercial.

And also, we are focused -- also focused on specialty insurance, alternative transaction like transfers. So we have multifaceted growth in the United States. So in commercial insurance, we want to really build a strong presence as commercial insurer in the United States.

And so the retail that I think you have talked about, do we have any bridgehead for retail insurance? We are not looking into that possibility.

So we want to, I mean, yes, enhance our presence in commercial insurance.

Morimoto-san, can you further elaborate on that point?

Okay. Thank you very much. So could we turn to Page 49. So on the right side, we have 3 pillars of our businesses in Americas. So we have been MSIG USA, which has over 50 years of history in operation.

So we are shifting our focus more from JIA to open market. So -- and we want to focus on specialty area. MS transfers, so we -- the company is completing its third year. So it's MHI, it's a niche area, but we are minimizing the risk taking, and we are more focused on fee income.

So we also differentiation building on the credit rating. So these 2 are 2 pillars of growth in our current operation. So I mean, we are not looking into, for instance, retail insurance like automotive insurance.

So Berkley, so we have talked about that in Page 24 as well. So it's not just equity method profit that we are expecting. So we can drive reinsurance business between us and Berkley, and we can grow the businesses outside the U.S. So that's our perception.

So in U.S., so I mean, going into U.S. market from outside U.S. So there are very few companies who has -- I mean, came into U.S. from outside and made a success. But we are very committed to the U.S. market. And so -- and especially we are driving strong growth in MSIG USA, we are being accepted by the market. So we have -- so the U.S. insurance market is JPY 140 trillion. I mean that offers a stronger, larger growth potential.

So conventionally, we have been focusing on Japanese clients, JI channel. So we were not able to build our network nationwide across U.S. So we are doing that. So we are eyeing on -- we have initiatives to enlarge our distribution network widely across America. So MSIG USA, MS Transfers, so given the floating, I mean, so it's like their size is like JPY 300 billion.

Berkley, so they underwrite some reinsurance as well. And the premium of reinsurance, if you look into -- if you add everything together, so we have close to JPY 1 trillion. So I think our scale in the U.S. is growing. Of course, I mean, U.S. is much larger than the Japanese market. So given -- if we look at the market share, we are still small, but we are growing the scale, size of our business. And in that sense, we have governance, risk management, risk appetite. So I think like our U.S. peers. And I think we are ready to do that, and we are very mindful of that.

Ryusei Mashima, from Tokai Tokyo Intelligence Laboratory.

At the start on Slide 7, you talked about no more medium business plan to be established. It's going to be a single year plan only. And then on Slide 11, you talked about year 2030 benefit, JPY 150 billion from domestic P&C.

Looking at the slides, next year, probably this amendment of the Insurance Business Act, there will be some difficulties in domestic P&C. Then in '27, you are going to merge the 2 companies. And at the start of merger, when you are starting, I think there are some difficulties as well likely to happen. But given that, now are you only going to make single year plan?

So JPY 150 billion merger benefit? It's more backloaded. You're going to be seeing those benefits in the later years, close to 2030. And then by the way, regarding people and system integration and the early retirement, what's going to be the timing for that early retirement introduction?

And then on Page 11 as well, W.R.Berkley synergy, this company generates solid earnings, as you pointed out. But looking at the environment in America, in some lines of business, you begin to see softness and the policy rate might be reduced going forward in the different stages. So would synergy effect would be affected by such softness in the market or rate cut? Or is it a solid outlook regarding the synergy regardless of those changes in the environment?

Regarding medium-term plan, you used the word pass to make medium-term plan. But for me or for the company, we didn't pass the medium-term planning, but it's more like 2030 goal was really needed to be very clear. That was our first step. As of end of '29, we will be fully on line with strategic equity hold. So in the later years from 2030, we want to continue to progress in dividend payout, and that was a part of our commitment. So in order to drive the same level of profit, we need to show what we have to do.

And then in picturing ourselves in 2030, it is almost equal to medium-term plan. It's almost like equal fitting. From fiscal year '29, I mentioned about a 3-year plan from fiscal 2030, but the goal is going to be the same, whichever approach we take. So from 2027, if we had written medium-term plan, that would haven't meant that we would not going to discuss any vision. And now I have your time here and talking about what we're going to be in 2030 and what the merger is going to bring about in our group.

As we talk -- I talk about this, this is all about our medium-term plan. So I didn't make medium-term plan, but this is our medium-term plan. And each single year, we are going to refine this plan so that we are going to deliver results to present and then we are going to clearly state what our goal is going to be. So that was a key goal of this -- the information meeting today. Then it's true that in each year, we have different events to happen and some major changes to happen. But we all factor them into what we are going to do, what kind of costs incur and what kind of profit to be made. So this is all part of a growth story that we have drawn.

And regarding expenses, for personnel expenses, it includes natural attrition. So it is not going to happen just in 2030. But for natural attrition, it's going to more like impact -- evenly impacting the benefit. And regarding early retirement, upon merger, we are going to present the idea of the company and how the program works. So that the employees are ready to make choices in a good lead time. And regarding systems, upon merger, before until merger, there would be a cost of integration. But after merger, operating cost is going to be half. So -- there are some upfront investments, but we are going to see greater benefit afterwards. That is the image that I would like you to have.

Then the second point was regarding the America market and our view, in the line of property, especially cat property, there is certainly a softness already in the market. But the question is when it's going to the bottom or when we should see the bottom. It's different by underwriter, by company.

So when is the bottom is a big confidential information, so I'm not able to share with you. But for casualty, in Americas jewelry system, looking at all those rulings and outcomes, in the line of casualty, we expect flat.

So looking at such market, how we are going to take risk appetite. And that affects the performance of each company and the results of each company. So this is all about underwriting capabilities.

And you also mentioned the interest rate. But is good at foreseeing the rate trend to write the long-term policies. So in the past relationship, we are able to see how they manage that.

So such adverse situation in America is not going to adversely affect the company. Even under such adverse environment, W.R. Berkley is able to make profit out of it.

So because we knew it, we decided to make a decision, and we have a plan for future return. Just generally speaking, phase by phase, there are some differences year-over-year, but the publicized Berkley's historical 10-year track record can be seen, which says that in 2014 to 2017, when the market was still very soft, even factoring those numbers, their numbers such as combined ratio stayed at like low 90% on average.

And loss ratio on average was low 60s. So my point is that W.R. Berkley is a company that is very good at identifying which line to grow and which line to reduce depending on the market condition.

So for lines that do not generate that much of underwriting profit, they control underwriting. So in the next coming 3 years, we expect some more softness in the market. But in such environment, we don't really anticipate a radical consecutive growth. But in terms of growth trend, I think they are able to sustain.

Next in line, Ms. Tsujino from BofA.

So 2 questions from myself as well. One, so your share price, despite all these aggressive efforts are not very strong. So probably, I mean, there's a quite high share of particular shareholders.

So I thought you're going to resolve that through further share buyback, but that's not seeing progress. So probably there's a dissatisfaction among the market that the liquidity is not high enough. And -- so we are -- I don't think we need to continue to be concerned about this. So is it a matter of time that we can resolve this issue of your shares supply demand? So that's my first question.

And also the GINSEN's -- joint venture with GINSEN's, the agency. So I think you haven't started the operation. But at the same time, so you have a corporate agency, a big corporate agency. So you are probably communicating with all the big corporate agencies.

And some of these you will be inheriting. So so what is your expectation on corporate agency? So what are you going to inherit? Is it just the policies? Or is it the people that you're going to inherit. So the corporate agencies are faced with the current situation. Because they don't have a high-quality risk manager. I guess that's the situation. So if that's the case. So probably -- so once the business scope of this joint venture agency expands, you're going to need more people. So when that happens, probably, I mean, there's going to be some people from MS&AD going dispatch to this joint venture. So that's my second question.

Your first question, the situation around our share price. So that's a very big thought for me. So it's a very big issue for me, one of the biggest issues. So how are we going to resolve the issue?

So actually, sometimes I see that in my dreams while I'm sleeping. So I would like to bring a short-term solution to this issue. So maybe the next time or at least next time we meet, you don't have to ask this question anymore. Now how -- I mean, I'm not allowed to say how I'm going to do this, not today. So it is my focus. It is one of my top focus.

Your second question. So the situation of the corporate agencies, -- so I mean, the market is changing. So how can we further grow our market share, how can we lock in these corporate agencies. So that's an important thought. But I guess the important point is, so the corporate -- so how we can -- how can we convince them that we have high level of risk management, which is going to contribute to the growth of our client -- corporate customers.

If the corporate growth and gross profit and dividend and so insurance need to function properly in order for us to bring this virtual cycle in place.

And that's the important point on how we build this business. So how insurance company and insurance agency can provide high-level risk management system? So that's the most important point. Of course, the corporate. So if they are tapping into insurance, they need to have risk management team, people.

They need to develop keep on their end if they're going to tap into insurance for their risk management. So this is a mutual process between ourselves, insurance and insurance company and agency and corporate.

So the joint venture agency service JV between us and GINSEN's. So it's about how we can provide high-level risk management system. And that's the model -- it's the model case for doing that. If that is positively assessed, so probably we should be able to get the -- we should be able to inherit the business of the corporate agencies.

So we need to enhance the sophistication of risk management. Now so how our people will be doing that, assuming responsibility, what play the role. Yes, there's expectation on our people, MS&AD employee. And so we have a GAFA risk managers coming to us. So we are -- yes, we are receiving GAFA risk management interview.

And they used to work for insurance company. And so they are now responsible for risk management in these type of high-tech companies. And so they are doing very good job. And so we want to bring the same situation into Japan. How can insurance people and insurance agency people can contribute in this process. So that's my focus as well. So -- and yes, in working on this joint venture with GINSEN's. I hope that has answered your question.

Just one more point, I would like to follow up on what you said. Cost reduction, JPY 150 billion. You are going to implement cost reduction of JPY 150 billion. You're going to bring down the expense ratio. And so if you look at the domestic business, so on Page 9, if you look at Page 9, so you are going to see improvement of JPY 83 billion.

And on Page 10, JPY 76 billion improvement. So I believe you could have better improvement. For instance, the price increase for auto insurance? So you're catching up. So loss ratio, you're going to bring down the loss ratio as well. So I think you can see much more improvement here than what you presented here.

So can you elaborate on that point? So are you being very conservative on the pricing side? Or are you expecting -- yes, so we had a relatively few natural disaster this fiscal year. So maybe we should take into consideration there's going to be more natural disaster next year and the following years.

So thank you for the question. So I think you have made a very good point. We are being very conservative when we are presenting these numbers. So again, so please consider ourselves as being conservative.

So natural disaster, so this fiscal year, we had very few natural disaster. But in the future, we are still looking at the average level of natural disaster for the future years. So this number itself -- so we haven't been setting our target in this long time horizon like 2030.

We haven't been doing that. But when we focus many different -- so many people talk about profitability cliff in 2030.

Now there are a lot of uncertainty. So -- but we are trying to be as neutral in setting the target. So -- and neutral, and we are being very conservative in that sense. Thank you. Thank you very much. The target -- so the realistic number and ambitious number and I guess, neutral number. So I guess, yes, I mean, we are set for a realistic target at this time.

Sakamaki from Mizuho Securities.

I have 2 Questions. In domestic and international outlook, I would like to have some questions, Page 23 and Page 21. Starting on Page 23, region by region, in 5 years' time, the growth phase, is it conservative or aggressive? For example, in Europe for 5 years, soft cycle is going to be affecting. So it looks not so much growth.

But in Asia, it's a big fall, but the inorganic investment, if that is included, then the growth looks a bit modest. And for Americas, this year, JPY 40 billion in adjusted profit, so benefit of W.R.Berkley and Barings, where are you going to see them?

But if you are to generate JPY 100 billion existing business growth is not really factored into these numbers as it seems. So do you have any additional comments on this on internal business?

And on Page 21, domestic P&C combined ratio target looks conservative or is it kind of understated -- in the case of fire, for example, 80% wind, there's not much losses. But in the case of our [indiscernible], in normal terms, they still look at 80% level. So is this because of reinsurance strategy that you only come up with this kind of profitability outlook or loss ratio outlook? So can you fill in some more information on those terms?

So starting from myself on the first point to be also followed up by Morimoto-san. So looking at regions, softness is most affecting or impacting the Lloyd's market. On the other hand, on the reinsurance front, not so much impact compared to the syndicate.

So when the market is softening there is a gradual growth that is projected. In the case of Asia, it is a growing region in terms of population, et cetera. But pricing competition is very fierce in this region. Therefore, if you just invest the capital, you can't expect a proportionate growth. It's not that simple. So that's why we come up with this modest outlook. And as for the Americas, as long as you do the right underwriting and also allocate the right capital, then it is possible to drive the earnings and also premium.

So market characteristics and our own capital allocations are reflected in this growth outlook, if Morimoto-san has anything to add.

So let me add some more comments. Regarding Barings, it is not included here. In the Americas, for us, we want to focus on risk taking in this market. So as mentioned earlier, this is the largest non-life market in the world and JPY 420 billion, 40% actually is to come from America.

The key driver for that is the partnership with the Berkley and also equity gains. But the biggest driver is MSI USA's specialty line expansion. In addition to increasing the line of business, distribution strategy is now largely reinforced. So as a result of this effort, we have good confidence to drive this much of growth.

Regarding Asia, retail market is our key battlefield. So the number that is shown here only includes organic growth.

And for Lloyd's business, asks mentioned, the so-called secondary market, the risks that cannot be undertaken in the world's primary markets come into the Lloyd's market. So in the coming years, we are going to be selective in underwriting to engage in this business.

So Lloy'd going to be a little bit down in terms of top line, bottom line that's going to be supplemented by other vehicles reinsurance, so that as for the new initiatives, we don't factor into any other new initiatives such as inorganic. So are you fine with the first question?

Yes, I'm good.

Regarding your second question, fire insurance in normal times, I think it's very hard to define what it means by normalized fire insurance business trend because in the past, let's say, 9 out of 10 years, we didn't have major losses, but we have one big loss year, big typhoon, then a combined ratio becomes like over 100%. Therefore, the question is to make average combined ratio in 10 years to be in the 90s level.

But in recent years, it's different. Once in 10 year is a year that we don't have major losses. So we are in the opposite situation. So what kind of level of profitability we should aim for, whilst gaining understanding from the retail clients as well.

But in any case today, single year loss is being addressed and improving. But thinking about VA, what should be the cost of capital to be set the rate. So within the country, the value of fire insurance and the meaning and significance of this business and the costs all have to be factored into to do the right pricing. Therefore, 9 in 10 years are the years of losses. There should be set up pricing that should be reflected in the pricing. So this is the kind of dilemma that we need to address going forward, if anybody else has any other comments to follow up.

If not, then in the case of this year, there are not so many catastrophes. We sustain or secure 80%. This is what is necessary.

Then for a major loss like 1 in 10-year kind of event, how should we assess the probability of that to achieve 95% of average combined ratio at what rate? So this is the biggest question that is required of the industry.

Next in line, Sasaki-san from Nomura Securities.

This is Sasaki speaking from Nomura. Just one question from myself. So the synergy with W.R. B, so you talked about JPY 100 billion profit contribution. Just to confirm, so this number, so this would be a very big implication on the performance of W.R. Berkley. So have you presented -- so have you said JPY 100 billion upon consulting with the management of W.R. Berkley? Just to confirm.

As of now, we are we have started making investment into W.R. Berkley. So -- and I mean, this is going to be a matter of future communication with W.R. Berkley.

So you haven't yet talked about the profitability and you're assuming JPY 100 billion.

So the breakdown of this JPY 100 billion, so it's equity method profit and profit from the reinsurance business and also the profit from the partnership or the collaboration.

So what sort of situation we need to build to get to what level of profit. So that was very easy for us to imagine. That's why we came up with this number, JPY 100 billion.

You have not communicated about this JPY 100 billion with W.R. Berkley. So this is the number that you are envisaging.

So I'm not ready to answer to that question, whether or how much we have communicated this with W.R. Berkley.

There seem to be no more questions we will conclude the Q&A session here. For any questions that couldn't be addressed today, please feel free to contact the IR department for assistance. Additionally, we will send a short survey by e-mail later on. We aim to improve future activities. So we greatly appreciate your cooperation. This concludes MS&AD Insurance Group Holdings Fiscal Year 2025 Second Information Meeting. Thank you very much for your participation today.