Sompo Stock

Hello. My name is Okumura, Group CEO. First, about this title. Not only Middle East, but in various parts of the world, now we are looking at the geopolitical risks and the climate change and the declining population in Japan and AI and cyber risks. The landing environment is faced with very tough challenges, and we are standing at the front line. And we would like to dive into challenges and drive our evolution.

Next page, please. Before talking about the content of the presentation materials, the other day, we made an announcement. So we are going to change the name of the company to Sompo Group Inc, and that is the proposal from the other executive, the group. Last year, Sompo P&C and Sompo Wellbeing, these two new business units were launched. And by breaking silo and we are going to make advancements of the group as a whole.

And by changing the name of the company, we would like to focus more on One Sompo, more on integrated the management, not only about the change of the name, but it is true the vision -- to work on the vision to unlock the possibilities and Sompo and the group and each person working there, I believe in indefinite possibilities of potential of each person and of this group.

And we would like to make new challenges with that belief. And as we announced the other day, to domestic employees, we are going to grant the shares of the company so that both executives and rank and file people can work together to share the value.

So for that, we are going to be One Sompo and then make advancements. And so we are going to change the name of the company as well as renewing the vision. Now the gist of the presentation, I'd like to talk about three things. First, FY 2025, this is looking back the past, what we said and what we did and what kind of results were appeared in 2025. And then we are already running in 2026.

So this is the last year of the current midterm plan, and that is what is the positioning of this year? What are we going to do? And Sompo journey is going to continue. And beyond that, on the midterm, the image is 2030 and beyond. Towards that, what kind of initiatives are we going to take? These are the three things that I'd like to talk about today.

So let me start with 2025 fiscal year. First, looking back, please go to next page. So the summary of the year 2025. At the timing of results announcement for 3 consecutive years, we reported on the record high profit. So what has been supporting that various aspects are there? As I mentioned earlier, two business units are in place for Sompo and SJ-R and other business operation reform has been done. And at the same time, we have renewed business foundation and profit foundation and organic growth.

In addition, now we have Aspen, which has brought inorganic growth driven by Sompo International. We have expanded our customer base. Sompo Himawari and Sompo Care also worked on the customer and profit basis and expanded them. In each business segment, year-on-year basis, both revenue and profit increased.

Shareholders and all the other executives and employees, I feel really grateful. And as a result of that, market cap has been expanding very smoothly. And actually, it was 1.7x vis-a-vis FY 2023. Now some breakdown.

Next page, please. ROE, more than 13%, which is the final goal of the midterm plan was established 1 year ahead of the schedule. In my presentation, the normalized figures will appear on the if basis, but from 2026 business plan and beyond 2026. For example, if this happens, I'd like to remove such assumption.

And on a stable basis, we would like to achieve always 13% adjusted consolidated ROE or more EPS growth, the numerator, namely the profit growth and earnings growth and the adjustment of the denominator through that, we could achieve 19% growth more than we anticipated.

Moving on to the next page. So I would like to talk about the two business units that are supporting our growth. Sompo P&C, Sompo Japan and Sompo International together have created the Management Board. And we are learning from each other and growing together. So initially, Sompo Japan's underwriting culture, we are to enhance and we are to enforce and Sompo Japan members have given various advices and enhancement of underwriting is continuing.

And also Sompo Japan and Sompo International as if it is a single unit and as if it is a single business, the integrated risk management and risk management have proceeded. And in order to gain economy of scale, the arrangement of reinsurance has been done jointly and operation as well as IT, gaining the knowledge and expertise of Sompo International and no exaggeration to say the refresh of IT cost, which has progressed -- which is progressing significantly. And also, there has been a major progress in terms of investment results.

So as a result, Sompo Japan for the domestic business is visibly underwriting profitability has improved and also line size control as well as due to portfolio management, the results have improved steadily.

And also in the size control back in April 1, and also being able to control large events. This has been evaluated highly. So more than the market breakdown, we have been able to enjoy the reduction of reinsurance premium. And for Sompo International, a very good portfolio management is in place, not only underwriting cycle, but for asset management as well.

Gradually, the portfolio has been controlled and the duration in order to extend slightly, we have expanded the fund for managing assets. So NII has grown stably and organic growth, U.S., EU as well as lately in Australia, we are enhancing.

The other day, I was in Asia, and in various countries of Asia, against growth, people are hungry. So although the rates are being coming softer, but in pricing, the underwriting is growing organically. On top of that, inorganic growth, as a first step, last fiscal year, the acquisition of Aspen had realized.

So later from London, we have and Nick. So Aspen's PMI, the top management of Sompo International from London, which is the largest location, they are proceeding with PMI. So perhaps they can report about the progress of PMI later.

So meanwhile, Sompo Wellbeing, last fiscal year, we've created this business unit. And for fiscal year '25, how do we evaluate Sompo Wellbeing? In a nutshell, organizing a business foundation.

So starting from fiscal year '26, we wanted to shift to implementation and leap forward. So it was a preparation period. We have tried to fill in the services in order to dispel the three concerns of aging society. So Sompo Himawari and Himawari Life have increased the customer base. So it has expanded the customer base. And also nursing care business with fewer children and aging population, it is difficult to secure people for work.

So for future nursing care, utilizing data and technology being able to make it more efficient while maintaining quality. So that's the challenge we're taking on. And what was coming up was the business foundation to improve profitability.

So for nursing care business, we have grown the number of customers as well as expanded our business foundation. That was fiscal year '25. As such, so for fiscal year '25, we have been saying this is what we're going to do. This is what we are aiming for. And we realized this in '25. But for '26, this is the final year for midterm management plan.

So for fiscal year 2026, we want to further improve our profitability and capture efficiency and learning up to 2030, we would like to accelerate our initiatives. So EPS growth, 12%. We expect the growth plus 12% and ROE more than 13%.

Like I said earlier, once again, let's say, if we exclude this factor, there are numbers that have conditions. But by 2030, even if we exclude these noise, we want to be able to stably achieve ROE of 13% plus.

So that's how we would like to drive Sompo Group. So 2 years ago, compared to '23, the adjusted profit to double and market cap to double. So that's what I said. For profit, I took the average profit prior to fiscal year '23, but adjusted profit we have largely exceeded or will exceed the number that we would like to achieve in 2030. So towards FY 2030 compared to FY 2023, we are discussing how we could improve profit and market cap to become 3x.

So based on that target, what kind of portfolio to be created? So how are we going to combine organic and inorganic? So at executive level, we are seriously having a discussion moving on. FY 2026, compared to the timing that we developed the midterm plan, adjusted profit has shown steady growth.

When we announced the results, we talked about favorable nat cat situation, both at home and abroad. That was the tailwind. However, even without those one-off elements, our adjusted profit normalized level has been rising, and I'm very certain of that.

Next page, please. FY 2026 this year, Sompo Japan and Sompo International, the driver for the profit is Sompo P&C. For Sompo Japan, various measures are taken. Actually, there are some headwinds. Inflation, for example, is continuing in the current external environment or labor shortage, given such situation, we cannot expect inflation to stop in the short run.

This means that the unit price of the insurance will see the ceiling very soon. And in the circumstances like that, not just raising all the premiums at the same time, but we can make the more balanced -- well balanced out the pricing structure, looking at the situation of the customers. And by strengthening underwriting, we believe that we can improve our profit.

For Sompo International, organic growth is one thing. As I mentioned earlier, through geographic expansion, all in all, pricing situation is softening, depending on the business lines, double-digit down is happening.

But for Sompo International, for region, by region, what kind of pricing by region that will produce positive profit. Such detailed calculation is happening. So even in a somewhat softer market compared to 3 years ago, we can still be very profitable.

And they are strengthening underwriting. And casualty where the market is hardening, we are going to increase casualty and we will increase the asset under management, thus NII. At the same time, we are working on Aspen PMI. And by doing a good work on that, both top line and the bottom line, we'll see contribution from Aspen.

So Sompo Japan and Sompo International, so they are normalized level, JPY 65 billion expansion of the profit. And as a result, 2026, if the nat cat is normalized, still we will be able to achieve JPY 500 billion. That is our plan. On an if basis, if as it was the case last year, nat cat was favorable, then this JPY 500 billion could be JPY 600 billion.

Next page, please. As to Aspen, so to person in London would like to talk about it later. So for integration, rating and capital release are moving on very well. And after the closing in memory, we have been integrating the offices, negotiating with rating agencies for upgrade.

And if you have any questions, my colleagues in London would be happy to answer your questions. Aspen and Sompo International integration, I think synergy or cost synergy is probably the easiest to understand.

When we acquired Aspen, new Sompo International, about 10% of the other expenses or $200 million cost synergy is the target we set, including office organization integration, consolidation or process consolidation, integration. There are various measures to achieve it. Already 65% of synergy has been achieved or factored in some other measures.

So the 30% strong remaining portion synergy will be achieved. And by doing so by 2029 fiscal year, JPY 200 million cost reduction synergy will be achieved. 2026, Sompo Wellbeing, as I mentioned earlier, the foundation that we developed in 2025.

And then 2026, we will enter into implementation and business expansion phase. To be honest with you, there are some missing pieces, actually, many of them. There are 100 years of life to go along with that, when we want to solve three concerns, there are some of the initiatives that we need to take, but the customer base consolidation and new product development and Sompo Japan and Sompo International going together hand in hand, and that is Sompo P&C.

And the Sompo will being here by making more efforts here, the more solid customer base that will be achieved. Now we have the new partnership with Kamakura Shinsho and new companies up and running. So we are now entering into the phase of expansion that is the positioning of 2026.

Next page, please. So now I'd like to talk about midterm growth strategy for 2030 and beyond. Here, Sompo P&C and Sompo Wellbeing are the two wheels of the vehicle to drive the business. Those 2 business units, organic growth for Sompo Japan, and we are going to show you some more detailed paper, organic growth and for Sompo P&C organic growth plus inorganic growth that will be worked on.

For organic growth, the keys are DDX, digital data, AI, the full leverage of these elements. In doing so, new way of work, new role of human beings. And for that, we will make in talent as well. So for Sompo Wellbeing, the business foundation is set up. There are missing pieces, we will be filling in and we are improving profitability as well as expanding the customer base in Japan.

The refined solutions, those solutions developed in Japan will go out to overseas and vice versa. So a true global company will move forward in its journey. And also in 2030, the portfolio that we aspire to achieve and also not only improving the capital efficiency, but also stabilizing the profitability. By doing so, we would like to further grow and make a progress.

Moving on to the next page. Once again, as I said, Sompo P&C, there are organic growth as well as inorganic growth. that could be achieved. And the core would be domestic P&C business, the Sompo Japan as well as overseas, we have Sompo International. But for Sompo Japan, the combined ratio in a stable manner, we want to achieve 95% and leveraging AI as well as data and automating process and simplifying products. Dual structure needs to be dissolved.

Through these initiatives, the expense ratio will be brought below 30%. So day in and day out, we are pushing with these efforts. And for Sompo International, JPY 25 billion organically. This is the top line. This must be achieved. And for fiscal year '26, Aspen's PMI, this will be the first and foremost priority.

But it's not that we're not going to do anything besides PMI. But looking at market environment of insurance, it is softening somewhat. So inorganic growth opportunities are growing significantly. So we want to do a disciplined M&A. This is a good example that we saw in Aspen. And in order to realize Aspen, we have considered various potential acquisitions.

And we decided to not to proceed. And this is because we have disciplined M&A, which is very important, same as underwriting discipline. In order to grow and stabilize our profitability as well as minimize volatility as Sompo P&C growth will continue to be our choice.

Moving on to the next page. I'm sorry, this is a busy chart. Ishikawa-san, I'm sure you are willing to talk about it, but Hikeshi DNA at the center. So back in 1888, the fire insurance company as Tokyo Fire, that was the very start of Sompo Japan. And now this is to be modernized to the current Hikeshi.

So we want to deliver safe and security and health of people. Of course, if something happens and if there is a loss, that will be the payout of insurance claim, and that will be the first and foremost.

But even prior to these disasters, we want to work on the solutions along with the partners so that we can deliver good solutions, attractive solutions to our customers based on technology. And also, we want to leverage data, digital AI to deliver new values to our customers.

And by reducing expense, we want to make it at an affordable price, reasonable for customers. Commercial domain is expanding. So global level underwriting is becoming very, very important.

So in the future, the sales of commercial will be field underwriter and understand customers' needs as a risk manager and understand the risks and not just its own capacity, but being able to negotiate with the reinsurers and arrange facultative reinsurance. That's the level of commercial underwriting we hope to achieve.

In 2026, Sompo Direct generating profit is around the corner. And we are very flexibly changing the rate, and we've changed the rate 7 times a year last year. Over the past several years, with Sompo Japan and Sompo Direct, the transformation was underway. And in fiscal year '26, this will be realized. But furthermore, by leveraging AI, I'm sure that this business model will evolve further.

Moving on to the next page. Wellbeing. As I have been saying, we are filling in missing pieces. So we will be working with external partners and expanding customer base and base and this should be a stable profit, which will contribute to the stability of profit of group overall and also solution which has been defined in Japan.

This will be exported to outside of Japan. When I went to Asia the other day from Asian countries, this whole business model or even a part of this business model, please roll out them in Asian countries. So these were requests.

So Wellbeing is now in Japan, but in light with a view to going overseas, we would like to drive this business forward. And I myself, I want to increase ROE to plus 13% in a stable manner. And regardless of uncertainties in various cultures in order to offer safe and secure and healthy future, of course, scale is important and diversification is important.

So the next M&A following Aspen, I want to execute in a steady manner and for sure, so that profit can be brought about by plus JPY 100 billion plus. And for Sompo and Wellbeing, there is a long list of targets also in new businesses as well. But we don't want to do M&A for M&A's sake. M&A has to contribute to our value. So that's what we have in mind when it comes to M&A.

So like I have been saying, I don't want to include special factors. Excluding these -- excluding those special conditions, we are to achieve 13% plus ROE. So towards that end, we are to create our portfolio.

And regarding our shareholder return policy, regarding return to our shareholders, we will strengthen. And gradually, we will increase the payout ratio. And by 2030, we want to raise this to 50% and ROE 13% in excess. So we don't want to just randomly pile up our capital, but flexibly buy back our shares. And once that improve our ROE.

So this will conclude my presentation. Up to fiscal year '25, I evaluate that we have been performing well. But important thing is what's going to happen beyond 2026 and on to 2030. So at executive level, we are discussing in depth. Hopefully, in fall and towards next year, we would like to disclose the information to you.

Thank you very much, Okumura-san, we would like to move on to Q&A.

[Operator Instructions] Our first question is from Mr. Muraki of SMBC Nikko.

Here is Muraki, SMBC Nikko. I have two questions. First question, on Page 21, the future investment, especially overseas. So more than JPY 100 billion of profit is going to be accumulated, it says. How much of it will be overseas? And as I asked in the past, how much M&A? So ESR over 200%, I think you have JPY 1.5 trillion or so the capital.

How much of it will be used for overseas? Tokio Marine & Fire over USD 10 billion. That's what they said to overseas mass media. Do you have the similar size for overseas investment?

Next question is on Page 18, domestic P&C business. So three company structure basically. What is going to be your characteristic? Over the past 10 years, on a comparison basis, your share went down and the business expense ratio are on the same level as the peers.

MS&AD, they now have the top share with the consolidation. Tokio Marine and Fire, they differentiate themselves by solutions. What is going to differentiate your company? And how that difference will be translated into numerical differences?

Masao, thank you for that question. The first question is about M&A and capital allocation and what are our targets? I think that's what you meant. And the second one is about domestic business. Ishikawa-san is going to answer the question. So as to your first question, let me take that question first, and then probably Jim and Nick can make some supplementary comments. As we have been saying for a while, about JPY 1 trillion or so M&A is doable.

But to do that, we need to go through some process, not only overseas, but for some for wellbeing also, there's some effect coming from M&A day in, day out, I see it in the form of report. But right now, the current growth and the financial market situation, if we just want to accumulate numbers, then it will be easier to understand overseas rather than domestic market. We are going to accelerate discussion in this field.

But on a bottom-up basis, picking up various potential deals, the hundreds of billions, maybe, but -- or it could go over JPY 1 trillion. We are doing that kind of discussion. M&A structure will be part of our discussion as well. 60% to 70% of the capital will be allocated to M&A overseas.

That's the standard scenario and the remainder goes to the wellbeing. But after that allocation, what is the timing to recognize profit, that should be part of the picture. And because of that, there could be some change in the number.

So let me -- let us start with the Ishikawa-san's explanation about initiatives in Japan. And then Jim and Nick can talk about overseas M&A market situation and what you have been doing as much as you can share with them. Ishikawa-san, please.

Yes, Ishikawa speaking. First, how to differentiate ourselves from the peers. I would like to say a few things here. First, Sompo P&C. Going forward, Japanese market is going to be westernized. That's for sure. The authorities are -- will be also westernized and for example, brokers will be more active in this market. So SIs, the know-how, the Sompo International's know-how will be arranged, if you like, for the Japanese market. That will be a big advantage for us.

SJ-R initiatives are actually seeing the effects of such effort. About JPY 60 billion SJ-R effect, which is going to be expanded. That's the first point. And second point, digitalization, we would like to make advancements strongly digitalization, deducts.

In -- from January 14 of this year, we started a trial. 90,000 the Sompo Japan employees were signed with agent. So all of them, except those who are on the leave, daily active user, more than 50%. That's the target of usage.

So retail, commercial and the other HD are using more of the AI agent. Weekly active users, so they're including administrative staff, so more than 70% of them are using an agent. On average, it is the order of 10% in this country.

So now we have usage ratio or implementation ratio 6x or 7x the national average. So DX, digital AI will be used more and more so that we will have much more lean and more productive organization.

And lastly, as Okumura-san said in his presentation, Hikeshi DNA project is going on, is underway. 1888, we started as a fire insurance company. And we are going to redefine as modern Hikeshi or fire extinguisher. So wellbeing in the wellbeing area as the extinguisher of the problems, we differentiate ourselves.

So Wellbeing and Sompo Japan, that is -- we are talking about the 20 million customer bases. So Wellbeing, the P&C side and well-being side can send their customers to each other. That is the structure which would differentiate ourselves. Thank you. Jim start your comment about overseas M&A market.

Thank you very much for the question. I believe the answer of what percentage was being allocated to overseas was given and give you a little bit of sense of how we approach M&A. We have a very rigid process in terms of evaluating how we deploy the capital, whether that's on organic opportunities or inorganic opportunities and are committed to delivering that return to both Sompo Holdings and to our shareholders.

I think you can see from the results of our recent acquisition, which we took time to find, is generating the returns and the commitments that we gave to the marketplace. So I'm confident that our process of evaluating opportunities, both organically and inorganically will continue and continue to serve us well in terms of the M&A marketplace.

The follow-up for the overseas. The pricing situation is softening. What is the bottom? How long this soft market will continue, do you think? And that kind of situation is linked up with the valuation at the time of acquisition and when the changes in the stock price will come?

In other words, my question is what will be the good timing for the acquisition? Duration, when you say duration, what do you mean? The duration of the soft market, how long do you think it will continue? And based on that understanding, what is the timing that you think that the best time to buy in the M&A market?

I have never discussed it with either Jim or Nick. Well, the valuation is coming down a little bit. But the reactionary move of the pricing situation, there are lots of elements there. Not just one big cat will not make any difference or the capital once it goes out of the insurance market, then the market will be hardening.

So as to timing, I don't think there is any definite timing to see the end of the soft market. I think it will continue for a while and the valuation is coming down. Jim and Nick, if you disagree, please go ahead.

Thank you. No, I agree. I think it's important that we manage and build our business through various market cycles. How long it will last? I'm not going to predict that, but you can see the cycles -- historical cycles. And so I think through strong underwriting and risk selection, we'll continue to manage through the cycle, and there will continue to be opportunities.

So I think if there is any chance opportunity in a disciplined manner, we think we can conduct M&A. But when it comes to PMI of Aspen and synergy creation, that is our commitment for FY 2026. And while doing that, we will not miss M&A opportunity. Thank you.

Moving on to BofA Securities. Tsujino-san.

First of all, rather a narrow focus. The automobile insurance for March 2027, the forecast, excluding nat cat, the loss ratio is 1.9 percentage points. That's the improvement level from initial forecast. You're seeing an improvement. So why is that so? And meanwhile, it is growing. The numbers are growing, but looking at the improvement, it will have to improve further.

And the pricing for July is 1.8%. So the competitive landscape, you're monitoring, I know, but maybe at some point, perhaps you will have to take action. Is that how you are planning?

And also next is about buyback. Last year or maybe around or until around winter, in order to achieve ROE 13%, perhaps a major capital adjustment has to be made. That's the message that was delivered. And this time, on the 20th, it seems like you have changed your direction. So that was the impression that I got.

Meanwhile, Aspen's PMI, those potential M&As that may not -- will not impact Aspen's PMI. So that's what you are exploring. So maybe you are being prudent in M&A. And you have strategic stocks that you can sell. So perhaps you did not have to change the direction 180%. So if you could give additional explanation?

Tsujino-san, you talked about the loss ratio of automotive insurance in Japan and improvement in profitability. So I will hand over to Ishikawa-san after myself. But not just auto, but as an insurance company, we have to do what needs to be done. And then we may ask for a proportionate share from customers and adjust. And if we have this order wrong, that is not going to be acceptable. And for the second point, I would like to respond first.

Within ourselves, we didn't intend or our understanding was not turning our directions in a wrong way or a different way. We have adjusted profit and realized JPY 530 billion. And there was a onetime factor. So adjustment was about JPY 100 billion. And this time, we achieved 13% of ROE.

But if we normalize, that would be about 11%. So in order to stably exceed 13%, then we need additional JPY 100 billion of profit and also the ESI calculation, the numerator as well as a denominator, we will have to think about.

So inorganic, in M&A, it depends on the market, and there is a partner, the seller side. And if we cannot do it, then maybe we can buy back. But if there is a golden opportunity of M&A, because we have a ceiling, do we let go of this JPY 100 billion additional profit? So that is why I'm talking about M&A. But we are still very particular about 13%. So Ishikawa-san, over to you.

About the automobile insurance, as you have pointed out, back in -- in July, this will be revised. So fiscal year '26, there was a revision in January. So this will be second time for this year. And the raise will be 1.8% in average. So with this revision, those policies after the revision, we will be able to achieve 95% combined ratio, so -- which is a target for us. So we would like to continue to retain these policies.

And this applies to other insurance companies as well, but we have long-term contract. So by changing the contract or changing the product, this does not act immediately. It will not have an impact. For the new businesses, of course, this will become and reach reasonable level. As far as long-term contract is concerned, earnings level is not sufficient.

So in January 2027, what are we going to do? We have not decided anything, but maybe on a needed basis, we will consider. And not just changing the rates or products, but underwriting as well as deductibles, we can -- and also exclusions we can set. And just changing the rates, if we think about loyal customers as well as agencies, they may walk away from us.

So like you -- as Okumura-san mentioned, we have to work on reducing corporate expense, commissions and then perhaps propose changing the rates will be the final option. Thank you very much.

Next question is from Watanabe-san of Daiwa Securities.

This is Watanabe with Daiwa Securities. I have two questions. First, on Page 23 of the presentation materials. So there's a shift of focus from share buyback to dividend payout ratio. So what is the time line for achieving 50% of the return ratio?

And also Page 11 of the supplementary documents. So here, my question is whether give the policy to pay out 50% of the proceeds after tax of the disposal also strategically held shares is possible to be reviewed? And the Page 8 are the life insurance business ROE, looks relatively low with budget. The ROE 13% goal, it would be easier to achieve exit from life insurance business could be one of the options going forward.

First, shareholders' return and the reduction in the strategically held shares and buyback. So now our new CFO, Tajiri-san, can answer the question.

As to 50% of the return ratio. By 2030, we'd like to achieve 50% [ TBR ] 1 or exceeding 1 in a stable manner. The stable profitability and review of portfolio through such efforts, we would like to steadily increase dividend and dividend payout ratio. So about share buyback Tajiri-san, please.

As Mr. Okumura said, at the latest by 2030, earlier, the better to increase the rate of dividend payout. So although we have been raising it to 39% level. So as much as possible earlier than later, we would like to raise it to 50% level. Why not 50% this year, you might be thinking? With the 50% of the total the return ratio, but we have to strike a good balance between dividend payout and share buyback. So this time, we have raised it to the order of 40%. As to strategically held shares, the stance remains unchanged, 50% of after-tax profit. That definition remains unchanged.

As to life's business, Oba-san Wellbeing head is here. As a group CEO, we are aware of the low ROEs that we are going to work on numerator and denominator, but a simple exit from life insurance business is a clear cut, no. So now Oba-san, please.

CEO of Wellbeing, Sompo Wellbeing, Oba speaking. So as Okumura-san said, the big policy is in place. And as to this no ROE of life business, I would like to make a comment. Basically, this level of ROE is dragging the whole group. And I have a strong sense of other crisis. We need to improve capital efficiency, and that's the shared understanding. That said, IFRS, the net assets being the denominator, namely ROE, given the rising interest rate and that is reflected in the net assets, which is denominator and increase the net asset. So it's a kind of net asset with noise, a little bit the blown up, the net asset. And that is impacting ROE. That's one aspect that we have to bear in our mind.

So ROE in the case of life business in various aspects, we need to have a multi-asseted way, multifaceted way of looking at it. From risk volume, based on risk volume there's required capital. And that is the denominator for certain net asset. And now based on that, it is over 10% ROE now is over 10%. So we need to have this multifaceted way of looking at it. And we need to improve the quality of business base and the business efficiency, operational efficiency that should be improved. And through that, we'd like to improve our ROE.

Follow-up question about the first one. Currently, the scheme of the shareholders' return basic, the return, 50% post the tax profit, 50% and also the capital adjustment. The basic return if it is already 50% of the payout ratio. Then still, are you going to maintained 50% after-tax basis?

For 2030, that is the 1 yard stake, by then, we are going to use the proceeds of sale of strategically held shares and by striking a better balanced portfolio and the better quality the portfolio should be achieved. And by then, the reduction in the 50% of the sales proceeds of strategically held shares will be maintained.

Next, from JPMorgan Securities, Sato-san, please unmute yourself.

This is Sato from JPMorgan Securities. I have 2 questions. First, I'm sorry to go back once again regarding ROE. So my question is as follows: To start with, in this midterm management plan, there was a target was not really 13%, but rather you expressed between 13% to 15%. In other words, perhaps if you have some kind of upside, then perhaps 15% is possible. So that was the assumption. So relatedly, what were some of the upsides that you had in mind to achieve 15%. And this time, you don't have this upper number, but rather focusing and emphasizing on 13%. And why is the reason that you are just giving a single number and also, as Ishikawa-san mentioned, deducts, digital, data and AI usage. You mentioned that you've introduced AI agents. And I don't think that will be a differentiator against competitors Honestly speaking, like Palantir and Lexia or Sompo [indiscernible] initiatives. So these were your uniqueness that were introduced to us. So this DDAX initiative that you are pushing forward. What are some unique initiatives that could be advantages over competitors? And also now in the era of GenAI, are you thinking that it has become difficult to differentiate?

Sato-san, thank you very much. For the first question, I would like to respond. And for the second question, Ishikawa-san and co-CDO, Kimura-san, is also with us. So from Sompo Group and as a broader Sompo Group, Palantir and ABEJA and these physical AI usage is something that I would like them to refer to.

Regarding your first question, ROE, the numerator, level of profit we had initially assumed. The contribution of Aspen profit would start to materialize from this year. But this may be delayed somewhat. It may not have a full impact, but I evaluate that it is contributing. But maybe we were optimistic about the denominator like market situation. So we proceeded with sales of strategic stocks. And all included, this is a business management, so I may be making an excuse. But I think there were factors in the denominators.

So in order to overcome that, we need to further expand our profit. So in organic as well as for Sompo International, we visit the retention and come up -- increase more quality in policies or compared to overseas competitors, can we not push ROE even further? So both denominator and numerator, do everything possible and try to improve ROE. We want to improve without making any excuses. So that's the question to your first question.

Regarding your second question, AI initiatives. First, Kimura-san, would you care to answer? And please add after that.

Sato-san, thank you very much for your question. As you say, multipurpose, general purpose AI, Ishikawa-san mentioned about Sompo's AI. But in the reference materials, Page 14 and 15, I think our characteristic is that we are moving in all fronts. So as Ishikawa-san mentioned, the general purpose AI -- Sompo AI agent has been introduced. So Sompo Group overall, we have 34,000 accounts and the penetration and promotion, I think that's very obvious and the benchmark DAU, 10% of the people using every day. And company-wide, we're close to 50%. So on to optimize the daily operation and make them efficient. That is something that we are really pushing forward. And also on Page 14, the Specialized AI for operation to be embedded and make it automatic end-to-end. So once again, going to Page 15.

So without any holy sight, we are applying to all operations. So if you could go to Page 15, AI 1.0. So that's the improvement of productivity. And when it comes to AI 2.0, this is a full operational process. And introduce AI to automate end-to-end. We are focusing on this. So at Sompo International, 50% of the claim process has been automated. So that's already a track record. And in group companies without any exceptions we are deploying so that we can achieve higher operational efficiency. And as Ishikawa-san mentioned, equivalent to 600 administrative staff reduction and also 2,700 equivalent sales operations personnel reduction. So these are the strength, and this has been almost realized.

Excuse me, perhaps I was not able to deliver my intent fully for the first question. On profit side, you have assumed yourselves that you have been successful, but you were optimistic on the denominator side. So if this is adjusted, then you can achieve 13%. So that's what you have explained. So my question was, you were successful and you were optimistic, and you've adjusted that. But you had a range like upper part of the range, 14% to 15%. That is not visible. So what were your assumptions? What did you expect on to achieve 14% to 15%. That was my question. I wanted to ask you. So if you can take that as simply as a size of M&A.

I see. So maybe more so than Aspen. Well, Hamada-san, who is not here said JPY 1 trillion. I don't want -- I'm saying bad things about the previous CFO but something bigger in size of M&A.

Okay. Before digital, I would like to add. General purpose AI, so corporate culture and future efficiency and in order to improve productivity, this is important. So I presented that earlier. But we have made a great stride here. So Oshiete SOMPO, by using LLM from external, let's say, agencies inquiries, we are changing to AI now, but LLM and AI, it would respond or assist the response and also when loss claim comes in, well, we're using a foundry of Palantir, and we added DDAX to that. So the person who will be in charge of that claim will be designated and also the repair factory. It would take photos and those would be sent and AI would look at whether the estimate of the repair cost is correct or not. So in this claim service operation, it is proceeding significantly so equivalent to 1,000 people in claim service operation, we expect to reduce in fiscal year '26.

So not only Sompo Japan, but in our case, starting with Palantir, ABEJA have been supporting us in the nursing care business. This is a major challenge in Japan. So unlike a common sense of the past can we not increase the productivity significantly, not only AI, but physical AI. We have entered into agriculture business as well. But can we not use AI in a totally different dimension for these business models. Once we make a progress, we would like to share this with you. At Sompo Japan, in various processes, AI is embedded. And now challenge going forward is those saved time and people, how can we shift those people in time to growth area and reap the benefits from that. I will stop here. Thank you very much.

Next question is from Niwa-san of UBS Securities.

Here is Niwa of UBS Securities. I have two questions. Page 10, long-term by 2030. So the 3x you said after twice, 3x or 4x, well, for the other 3x, based on what after 3x would be 4x. If it becomes 3x, it will be like 20%. Based on the current governance and the executive team, could you please give us some feel as to the governance and management, the sense of feel? Additional question to Sato-san's question. nursing care platform. So you have know-how and services to offer, I understand. Software development -- so the death of SaaS because of AI, how should we face with software development? Do you have to do it yourself? Or can you use rather AI to do more? Could you please talk about your direction?

Niwa-san, As for your first question, as of FY 2026, we said there was a profit in the market value as well. And the JPY 500 billion of adjusted consolidated profit and JPY 6 trillion of market cap. But now we can do more like 3x. Once we do it, then the stable ROE will be rising and more than 13% ROE without any conditions attached will be achieved. And more than 13% -- but when we say more, to what extent it depends on how we are going to redevelop our portfolio. At least given the current profitability level and the capital allocation for growth in -- organic growth, 3x profit and 3x market cap, I personally think are achievable.

As to nursing care, Oba-san, the Head of Sompo Wellbeing.

Niwa-san Thank you for your question. I am CSO of Sompo Wellbeing. As to the nursing care platform business and how should we think about it? I think that's the gist of your question and how we are going to use AI for that. So the platform business positioning of it in the notice business, platform business is as follows. So the base to support the daily -- but separate from the support business for daily the life of the users. We provide solutions for example. Outside the other publicly provided benefit we get the profit by providing such services. In the -- outside of the public scheme, and actually, this line of business is growing steadily. Despite from Business -- other than the wellbeing services, the other services provided by many nursing care players, we will give our know-how to those -- the nursing care providers in the form of consultation or systems. NDS is one of our subsidiaries, which provides the systems to the nursing care players that this company is actually the top player in the field.

So the know-how that we have accumulated is delivered through the know-how of those -- this company to other nursing care providers for fees. The key there is Sompo care. It's another top player in the facility care services and also data. We use our actual data, brushing up know-how so that it is -- it has become product that we can sell to other players. So I think capital profit it is set to hit this heading? Under such circumstances, we would like to grow this very promising business using advanced AI plant here at vigor. AI related companies with the most advanced know-how by combining the sample wellbeing data with such technological, I don't know how that will allow us to deliver the very -- the good quality products and services.

One additional question, market cap. In the simple calculation JPY 9 trillion will be the result of simple calculation. So what is the calculation that you used for your number?

It is not authorized yet, but the actual amount of adjusted profit and the net assets supporting it, PBR, NPR, combining all of them, JPY 8 trillion to JPY 9 trillion will be the result.

Moving on from Morgan Stanley MUFG Securities, Takemura-san.

I have two questions, if I may. My first question is about future M&A and your idea towards future M&A. More specifically, what will be the areas of interest or where would be an area that you can generate potential synergy. For instance, in the reference material, Page 37, by region, by segment, by risk, I can see the breakdown. So in line with these information, if you could give some hint of where you would like to grow or where you would like to generate synergy?

That was my first question. Second question is related to Mr. Niwa's question. Following Mr. Niwa's question in FY 2030 profit to triple. That's what you mentioned. So that is 3x of FY 2023 adjusted profit of JPY 335.9 billion. Is that correct understanding? And so excluding JPY 100 billion from additional profit of investment, that means you need additional JPY 400 billion. So it could be a rough image, but what are the potential drivers? And maybe the reduction of combined ratio in domestic benefits, maybe that would be one factor. But if you could add color to it?

Your first question regarding M&A, especially overseas M&A, things are moving around. So I wonder to what extent I can talk about, but what will be the line of business or which region? Maybe Nick and Jim could add? And your second question -- so back then, it was not IFRS, but it was JGAAP and it was about JPY 290 billion profit. And in '22, '23, it was about JPY 250 billion in average. So back then, I wanted to double that to JPY 500 billion by 2030 and a market cap to JPY 6 trillion from JPY 3 trillion.

So if I use the phase back then, it's JPY 700 billion to JPY 800 billion profit, including organic loss and both on M&A. And Sompo Japan, including the expense reduction, combined ratio will improve and wellbeing will increase its profit as well. And on top of that, inorganic growth, then I came up wtih that ballpark number. But at a management level, having a detailed discussion in 2030 and beyond, what is our vision? What are the values that we want to create? What are the needed portfolio to get there, we are working on the details.

So now for overseas M&A from Japan,J and nick can you explain?

Yes. So the transaction we dusted with Aspen was really more about scale and getting the benefits of the scale in the markets where we get business before in the U.S. and on and getting some product extension as a result of that. Looking forward, it's very difficult to tell, but we're relatively happy with the mix that we have, but it could come in many different ways, logical footprint extension is adding lines of business. But there is one thing. I mean, the size of the transaction and the work associated with it, there is value in sort of getting the economies out of that. it's very difficult to tell what we'll do back, but this last one is representative of adding additional scale in the regions and the markets where we were the biggest.

So apart from specific potential deals, -- for instance, in Asia, we are running joint venture for some time. Well, maybe we can have potential to grow, and we can capture more growth in these regions as well. That will be all.

Sasaki-san from Nomina Securities.

Two questions. First, inorganic M&A, so you presented any other cases. What is the time line to make a new deal to make a deal and to create a new picture of P&C by 2030, you're going to make utmost efforts until 2030 or in the 1 to 2 years in the short term, are you going to decide on the other deal, I mean, because you -- the very sick capital comes with cost of capital. So when we think about your share price, we need to have some discount on the thinking about the -- your share prices. Any hint that you can give? That's the first question.

And the second question is this slide, the top right wellbeing missing piece acquisition of missing piece here, it says, is it about life business or nursing care or other than that or life business overseas is included in the missing pieces? These two questions.

Sasaki-san, your first question in organic, what is the time line you said 2030 for me -- in terms of the sale of strategically held shares because that the operation will be completed by then, we need to build a good portfolio. That means 2029 or 28 late 2028, to do M&A '28 or '29, it is rather difficult to expect it to make full contribution. So the global market -- insurance market is getting softer. And the valuation, I think, is getting lower. So Aspen PMI, we will welcome that. So we should not put too much the burden on the frontline people. So we are continuing the to seek the good targets for the next deal. We will not wait until the 2030.

So as to the three the uncertainties, including the retirement fund. But at this moment, we do not think about big well-being-related M&A overseas. We are front runner of the challenges, especially for well-being because the problems are emerging in Japan. So we need to give solution as much as soon as possible. And after that, we think about operation overseas, the size of the life business, nursing care business should be expanded. And also, we do not have many functions on our own. So maybe we would like to buy them from outside if there are chances. And the future nursing care, future care or the more significant labor shortage, even when that happens, we need to provide a good business model. And when we can do it, then we will see that has to expand our nursing care business. Oba-san some comments.

So being CEO over as to the M&A for well-being, whether it is a missing piece or not. Well, three concerns: health, nursing care and retirement fund, these three concerns. In order to solve these things, we'd like to provide a solution. That's the first thing that we plan to work on. That is our basic policy. And we are going to seek missing pieces. There are two big policies, first, functional access. In order to solve these three concerns, we need to think about the functions and also the customer base acts, including the channel. In these two directions, we list up some candidates and -- which are under review.

And the example who that is Kamakura Shinsho, the tie-up with which we announced in December. Kamakura Shinsho is the biggest player when it comes to end-of-life platform. And with this tie-up we will provide life-ending support in the form of Sompo Care or life, and that is what we are working on. So the functional access and the customer base access are the two perspectives that we adopt and as to the retirement fund, we do have a life business, but we needed to have more vehicles or the partners for the life side to provide more services to retirement fund related services. And the B2B corporate wellness business, the business cares and corporate wellness wealth and wellness -- and we would like to work on that as well.

And for that, we would like to find a partner for that purpose. And that -- those are the priority items for the time being. As to customer base, the customers of other life insurance companies are in the scope. We do not exclude the Life business. So we are using the wide perspective to find partners. And that's -- well, we do not intend to consolidate with some life company. But at the same time, we do not exclude life companies from our list.

Sakamaki-san from Mizuho Securities.

This is Sakamaki from Mizuho Securities. I have two questions. One is about domestic P&C ROE midterm management target. You have exceeded along with the improvement of automotive insurance profit Also, you are planning to reduce expense as well on a JGAAP basis. So to what extent is it possible to raise ROE of this domestic business? So what is your perspective at this point? Next is about capital policy. The ceiling of ESR has been eliminated, and you have changed to show the capital efficiency based on ROE. So how are you going to ensure the discipline of the capital -- so this will be a rather a question about management style. So using buyback for a certain part of EPS and thinking about the growth of EPS. But under this new scheme, how are you going to ensure capital discipline?

First of all, your question is about domestic P&C business, denominator is not the actual capital, so -- or maybe additional explanation will be necessary. The improvement of combined ratio and improvement of expense ratio, if we progress, then virtual ROE will be in excess of ROE. Do you want to add any comments?

Okay, Ishikawa-san, would you care to respond? And also about capital discipline, I, myself, I would like to respond and, if necessary, CFO, will add a comment.

I am Ishikawa, in charge of domestic business with a virtual capital allocation, this will change. So this will be our perspective. When we formulated a midterm management plan, the target of domestic P&C ROE was a 10% target in 2026, but 40 points in 2025 was achieved and 12.4% in '26, that's the forecast because it will normalize, but we are able to achieve ahead of the schedule. But going forward, impact of SJ-R and also underwriting and with a good management, we believe that capital efficiency can further be improved. So the target is to contribute to the group, it will be somewhere between 13% to 15%. And we want to maintain the rate, and it shall not be impacted by nat cat in Japan. And second point, -- regarding this question, the limit of ESR. -- eliminating that and prioritizing M&A and expand the numerator.

But as was mentioned in the return policy, the adjusted profit -- and again, half of a gain from the sale of strategic shares and ROE of 13% is the target. -- and adjusting the capital. So these ideas, we will continue to stick to. So would you like to add Tajiri-san?

As Okumura-san mentioned, in order to improve capital efficiency, I'm sure there is room for the current businesses to improve ROE. We have enough capital. Also, we can take more risks. -- and improve ROE, both domestic and overseas. But at the same time, we need to prepare for future potential M&A. So we will adjust our capital level. on a necessary basis. So these three will have to strike a balance. So rather than getting an approval of under MTMP, we work on year-by-year. And we will come up with a rolling plan of 3 years going forward. Like 3 years from now, maybe ROE, 11% is not visible or 13%, not visible. But then we will have to include in our option to adjust our capital.

And if I were to add, I think these apply to other companies as well, but the capital is not being leveraged fully according to the government so fungibility if things are stuck, then we can perhaps use reinsurance and circulate the capital within the group. So I would also like to also thinking about the quality of the capital as well.

Maybe I missed it, but next midterm management plan, you are not going to formulate. It will be a rolling period like 1 year basis?

Well, under current MTMP, the dollar amount target has not been disclosed. Of course, for some of the businesses, we have a certain criteria in place, and we work on a 3-year rolling plan. But external environment is changing dramatically. It's so dynamic. And can we put together and formulate a certain dollar amount of 3 years from now at one point. Rather, it would be better to be on a rolling base every year or think about scenario base or risk based. This is to be discussed. But when we complete the current MTMP, what will be the direction that and targets that we would like to present to the market, we will have a further discussion inside.

So the time is running out. The next person will be the last person to ask questions. Tokai Tokyo Intelligence Lab, Mashima-san.

Here is Mashima. Page 7. So I was looking at Page 7. It is a detailed question, domestic P&C site control. About this reduction in the large losses are expected through line science control. Does this mean that the -- you are seeing some other cases where the control is not appropriately done. And also, you said that you would like to reduce IT costs, if I understand that correctly, DX, but you are saying that you invest in AI and DX investment? And how are you going to reduce investment? Do you mean that you have renewed all of these things to some extent, so you can either reduce the cost there or using AI agent that can write the other programming codes to reduce outsourcing costs? These two questions, please.

So your first question, Ishikawa-san is going to talk about the reaction on the front line. And as to the second question, Tajima working on -- so the -- including the know-how you gained from Sompo International. Of course line control, size control in doing that kind of control communication with customers is very important with the old sense of value, the sizes were quite big and with some customer accounts, management-wise, we had to struggle with it. But in a certain period of time, we have been negotiating or communicating with them to gain their understanding.

As to IT cost, so we renewed the core systems and amortization is happening. And compared to other inflationary the goods, the IT cost is the above that average inflation cost. So that was the most important priority. And Tajima-san is going to talk about it. So about the reaction on the front line for line control. Ishikawa-san please look at Page 28 of the supplementary document, what kind of the portfolio synergies we have taken that each shown here. So by different appetite, there are different volatilities. And now we have detailed segment control or management to increase good risks and reduce not so good risks. And that's what we are doing with the frontline people.

As you can see, the we use data and deducts if I talk on the retail side, automobile insurance, that we used to get 200 meshes for the segmentation. But in SJ-R not to fund it, but the 17,000 niches are used for the control. That's how we are the managed segment to develop a good portfolio. That's the basis. It's not about huge capacity or anything like that. And if we do so, we review -- we renew it or the change the other conditions by taking good communication with customers. Of course, we set sufficient lead time when we talk with customers. So we are not seeing any material troubles emerging. And of course, we need to the focus on customers. And by doing so, we are building this portfolio. And as to cost, -- as you pointed out quickly, in the Sompo P&C, this IT is the initiative that we are taking.

As we discussed last year, Regime talked about the JPY 30 billion reduction as the North Star. He made that announcement last year, and we are going to -- we are working on that. And so the business side, people should be involved as well. And JPY 4 billion for '25 and for '26 JPY 7 billion. So more than JPY 10 billion impact is already emerging. Actually, it is expected. And until April,I was the CXO of Sompo Japan leading the base.

As Ishikawa-san said, in this new ecosystem of Sampo P&C. And I think this is the example with the biggest effect. Sompo International COO, Daniel and myself work together to avoid the more complex systems to move away from such trend of the complexity of the systems. The shared -- the challenge among all the Japanese companies. I have been thinking about it with Daniel and Daniel participated in the meetings. And Daniel used to be working at Zurich, working on a similar framework. So leveraging his experience, especially for maintenance systems cost, we have simplified it. We have reduced hundreds of vendors we have narrowed down the list of vendors. And under the banner of North Star, we have been reducing cost by about JPY 10 billion already and it's aiming at JPY 30 billion.

So in the digital world, in order to reduce cost, if we just stop making investments that will make us weaker. So this current maintenance cost will be reduced. But for the deducts for future investment, that's different that is managed separately.

Thank you. So we have exceeded our time, so we would like to close the meeting. If you have any additional questions, please contact our IR team. Thank you very much for your attendance.

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

Hello. This is Tajiri, Group CFO of Sompo Holdings. Thank you all for joining us today. I'll be walking you through what we have disclosed today, full year results for FY 2025, full year forecast for FY 2026 and the shareholder return. I will just give you main points. I will take questions after the explanation.

So without further ado, please turn to Page 3. It says executive summary. This page captures the highlights of today's presentation. Starting with FY 2025, we delivered growth across all business segments. Profitability gains at Sompo P&C, in particular, were the driver of the group profit, lifting adjusted consolidated profit to JPY 535.2 billion, up JPY 211.8 billion year-on-year and a new all-time high. Notably, this means we have achieved our FY 2030 target of JPY 500 billion, well ahead of schedule. Looking ahead to FY 2026, our adjusted consolidated profit on the nat cat and other normalized basis is projected to grow by further JPY 62.4 billion, again, reaching a record high.

The key growth drivers are continued profitability improvements in domestic P&C, along with meaningful earnings contribution from consolidation of Aspen in our overseas insurance business. Our shareholder returns, we remain committed to the policy outlined in our medium-term plan. Total returns for FY 2025 dividends plus share buybacks will come to JPY 281.6 billion. For FY 2026, we are raising the dividend per share by 33% to JPY 200, which would mark our 13th consecutive year of dividend increases. The pages that follow will cover each of these points in more detail.

Please turn to Page 4. For FY 2025, as I said earlier, adjusted consolidated profit came in at JPY 535.2 billion, up JPY 211.8 billion year-on-year and a new record high. In domestic P&C business, profit rose by JPY 95.9 billion. While decrease in nat cat provided some tailwind, the main contributors were a plus JPY 70 billion in improved base profitability of Fire & Casualty and JPY 15 billion increase in investment income driven by stronger fund-related returns.

Adjusted consolidated profit of overseas insurance business increased by JPY 105.5 billion, while the favorable nat cat situation contributed base profit other than nat cat also improved, for example, through better loss ratio contributing JPY 25 billion and increased interest and dividend income due to larger AUM bringing JPY 27 billion positive impact. Sompo Wellbeing increased its adjusted consolidated profit by JPY 7.9 billion with decreased claims payment and growing nursing care business.

Page 5 shows drivers of change for FY 2026 full year forecast. In FY 2025, as I mentioned earlier, there was one-off tailwind coming from decreased nat cat losses contributing JPY 97.7 billion. FY 2026 adjusted consolidated profit is expected to be JPY 500 billion, up JPY 62.4 billion compared to FY 2025 normalized basis, excluding the impact of this tailwind. For domestic P&C business, further improvement in underlying profitability of auto insurance and fire insurance will drive profit increase. Profit growth of overseas business will be driven by not only Sompo International's organic growth, but also full contribution of earnings by Aspen, which was consolidated in February with the acquisition completed.

Lastly, on Page 6, I explain about shareholder return for FY 2025 in accordance with the shareholder return policy in the midterm plan, the total return amount has been set at JPY 281.6 billion. Dividend per share is to be JPY 75 for the second half, amounting to JPY 150 for the full year. As to share buyback, we have decided to buy back shares worth JPY 69 billion for the second half, making the total annual amount JPY 146 billion. For FY 2026, dividend per share is to be increased markedly to JPY 200 or plus 33% year-on-year, outpacing the annual 19% EPS growth in the current midterm plan. Dividend is expected to increase for 13 consecutive years. FY 2026 payout ratio is expected to be 39% but on medium term, we will aim at increasing it to 50% level.

With respect to medium-term management strategy other than shareholder return, the group CEO will present it at the IR meeting from 3:00 on May 22. This is the end of my presentation. Thank you for listening.

Thank you, Tajiri-san. So with that, our first question comes from Mr. Muraki of SMBC Nikko Securities.

My name is Muraki from SMBC Nikko Securities. I have 2 questions. Please clarify how you calculate and define ROE. In reexamining ROE denominator, there's a new supplementary remarks this time. When you consider 13% in ROE target, I'm looking at Page 17, bottom footnote 4. Can you tell me about this section? Also, as you use ROE as your management KPI going forward, will you continue to use this adjustment? Or do you plan to introduce new definitions? So what is your view on this? So this is my first question.

Along with this question is about share buybacks. Your ESR is beginning to surpass your target quite significantly. So your reason for holding back on buybacks is because you have some visibility into investment or changes in circumstances. Can you enlighten us?

Thank you, Mr. Muraki. Let me answer the first question from you. First of all, with regards to the ROE for FY 2026, about some adjustments made on the denominator when we calculated it and adjustments that we made, you're right. As mentioned on Page 17, Asterisk 4, ROE is adjusted to reflect the financial market assumptions. The main adjustments include fund-related FVTPL, where the unrealized gains have unexpectedly increased and inflated the denominator. Here, we estimate that plus 1 percentage point or more impact. On a net asset basis, there's approximately JPY 400 billion increase. So that's the situation.

In addition, if we accelerate the sales of strategic shareholdings set out in the mid plan, so if that impact is included or if we sell off the large shares we own today, that would also have an impact. So altogether, we estimate that there would be an increase of JPY 800 billion in net assets. So that's our calculation. And if we adjusted the impact, we estimate the ROE for FY 2026 would be 13.1% as stated at the bottom of Page 17. So then the question is, are we going to continue to use this definition? At this point in time, we have not decided on any policy going forward, but we will continue to make sure that the investors understand our true capability from both denominator and numerator and then set our policy in the future.

Then let me answer the second question. While we basically maintain a total shareholder return ratio of 50%, we want to increase the percentage of dividend in the midterm. And so to demonstrate that, we have raised the dividend payout ratio to 39% and EPS was 33% higher year-on-year. The rest of the 50% would be used for buybacks. And the 50% of the sales of strategic shareholdings will also be used for buybacks as well. Meanwhile, in terms of midterm and long-term view, we believe we have room to grow organically as well as also in terms of profitability, we want to build capability to achieve 13% in a stable manner.

So we will maintain 50% in total shareholder return and generate a numerator that allows us to stably generate 13%. At the same time, we want to be starting -- we want to start preparing now to do a large M&A, especially at a time that the market is softening, we're beginning to see companies on sale far more than before, at least I have that feeling. I've been doing M&A, and I've been hearing about deals officially and officially different opportunities. And really no specific deals at this point in time, and that is why we're holding back on buybacks. That's not the case. But we could see it happening any time, and we're beginning to see that sort of situation. So that is why we want to be prepared for large M&A, want to secure ample capital and funds. So that's the basic thinking.

The next question is from Watanabe-san of Daiwa Securities.

Here is Watanabe, Daiwa Securities. I have 2 questions. The first question is about ESR on Page 14. So about target range, you set upper limit at 250%. Am I right to understand that now you have removed this upper limit? And as Aspen's impact on ESR was estimated 30 points, but now it is limited to 15 points. Why is that?

Second question is about your expected rate increase for auto insurance for FY 2026.

About the first question, let me answer your question. So the upper limit of ESR has been removed. So in order to achieve 13% ROE, we thought that the upper limit of ESR should be 250% or so. But it is not that once this 250% level is exceeded, then we will make more return on the short term, that will not contribute to the improvement of our corporate value. So we thought that we should make it simpler saying that we would like to aim at ROE 13% in a stable manner.

So this time, we decided to state that we will aim at ROE 13% in a simple and stable manner. As I mentioned earlier, for the large-scale M&A, we would like to secure a certain amount of capital. So we target at 13% ROE organically while keeping shareholder return share of 50%. And our scenario might not be realized as it is. For example, if share prices fluctuate, then we will consider capital adjustment.

As to your second question, namely Aspen's impact on ESR, as you pointed out, Initially, we thought that this acquisition will push down ESR by about 30 percentage points. But by the time Aspen deal is completed, the Aspen's profit had been accumulated, thus capital had been accumulated. And also at the time of acquisition, forecast itself was rather on a conservative side. So the actual impact has turned out to be 15 points.

As to auto insurance rate hike for FY 2026 and our forecast, already in January 2026, we raised it by 7.5% and in July FY 2026, we are planning another additional 1.8% revision. And beyond that, no decision has been made yet. Given the current inflation, we will continue to raise rates so that on a policy year basis, we can achieve a combined ratio of 95%.

So next is from Ms. Tsujino, B of Americas -- Bank of America Securities.

First, on capital adjustment. Up until now, your target in midterm plan was to achieve a minimum 13%. And I thought I was under an impression that, that was your basic thinking. But as I listen to you today, perhaps that possibility has actually come down quite significantly. That's the sense I have. Is that the right understanding, because you're also considering large M&As? So that's my first question.

The second question is on domestic loss ratio trend. I forgot the page. No, I think it's Page 23, bottom left, you see FY '26 forecast. Nat cat is included in here. So I'm not quite sure. If nat cat is excluded, what is the year-on-year changes? Would you be able to explain that?

Thank you very much. Then let me answer the first question. In FY 2025, there's one reason which is less nat cat, but because numerator got bigger, we achieved 13.4% or above. FY '26, due to absence of the lower nat cat in 2025, we're forecasting the level of below 13% at this point in time. Meanwhile, in terms of numerator, the level assumed in midterm will be achieved. But in terms of denominator, market change is not assumed in the midterm caused the denominator, including unrealized gains to get bigger and there were factors that were not included in the numerator and the denominator was increasing. So if you look at the single year in 2025, increasing above 13% in that single year, we would not be doing the buyback. That's not what we are considering right now.

So let me answer the second question about domestic loss ratio, excluding nat cat and the changes. So with regards to the forecast in FY '26, if you look at the main line of business, in terms of automobile, to give you the breakdown, so for FY 2026, we're forecasting 66.9%. In 2025 was 68.9%. So this is approximately 1.9% improvement year-on-year, so approximately 2%. And of course, at the basis, the backdrop is that there's a price increase and the effect is taking into place.

Next is regards to fire. In FY 2026, the forecast of loss ratio is 28.7%. In FY 2025, it was 25.9%. So on a year-on-year basis, this is increase in plus 3% or less. The main factor is that, like I said earlier, we do expect improved base profitability going forward. Meanwhile, the gains from the release on onerous contract will be gradually decreasing. So because of that impact, the base loss ratio will be impacted. So I hope you would understand it in that way. So that is all for me.

Going back to the first question, in terms of capital adjustment, if you were to apply that in this fiscal year, what would be the trigger? What would allow you to make that capital adjustment?

Well, that's a difficult question to answer because it's difficult to assume if this happened, we would do a capital adjustment. We don't decide in that manner. So it's quite difficult. But in terms of basic thinking, we don't make small adjustments or fine-tuning just because it's less than 13% in a single year. But we look at on a perpetual basis. If we continue to -- the situation remains, we will not be achieving 13%, then we may consider capital adjustment. And also, if there wasn't any large investment taking place in the near future, then we may need to do a capital adjustment.

Next question, Sato-san of JPMorgan, please.

It's Sato from JPMorgan. I have one question and my question overlaps with Tsujino-san's question. So in this midterm plan, there's a statement about additional return policy, explaining if ESR exceeds its upper limit continuously or it is charged to that other capital efficiency measure should be taken. As to the first one, this upper limit has been removed. And as to the latter, if all the unexpected factors are adjusted, that means that the net asset would move only as expected, then the additional return will happen only when profit does not increase as far as the current framework is concerned. That's my understanding. Is that correct? And also as to this ROE 13% that we have been hearing, that level is to be maintained in the next midterm plan?

Yes. If buyback happens only when profit becomes smaller, that means that there will be no additional return. But partly because denominator has turned out to be larger than our expectation. So rather than buying back our shares worth hundreds of billions of yen, we would like to secure it for future growth, the investment for the growth, and that will contribute more to corporate value. But on the longer term, as I mentioned earlier, organically, we are going to improve our growth and profitability so that we can achieve 13% ROE in a stable manner.

And once a big M&A deal is completed and the new portfolio is in place. And after that, this yardstick figure would be higher. But in how many years, well, it depends on what kind of deals are there. So at this moment, I cannot say anything for sure.

I have one follow-up question. Among the items adjusted for the denominator, the accelerated portion of sales of strategically held shares, the gains there are included in 50%. So that's okay. And as to the market factor, which is included in FBTPL, you cannot control it. So that is okay as well. But disposal of shares held by Holdings increased net asset, and that has come with incoming cash. So to remove it from the definition of the capital, I feel a little bit uncomfortable. What kind of internal discussions happened about it?

So as to the shares held by Holdings, and that is used for the adjustment, well, about that, first of all, as you pointed out, it came with cash, you're right. That said, this sale of shares are basically for the acquisition of Aspen. And of course, money doesn't have color, but timing-wise, that is what happened. So rather than carving it out alone and make a return, we thought that we should look at the overall capital base and watching closely the growth investment and M&A deals and so on, we managed the whole capital bases. So as to ROE, the prices went up. And along with that, we made the same transaction, and we used the proceeds for Aspen, and that has become one of the items subject to the adjustment.

Next, from Nomura Securities, Mr. Sasaki.

My name is Sasaki from Nomura Securities. Please tell me about overseas insurance business as I'm looking at top line. According to this year's guidance, if you exclude the effect of Aspen, the percentage decline seems to be slowing down. That is my impression. So what is the impact of softening? How do you view this? What is your view on the top line trend going forward?

Secondly, in your explanation today, you mentioned about M&A. When you acquired Aspen, you said that you will prioritize PMI. Therefore, you will not do any big M&A. But because the market is changing quite significantly. And is it correct to assume that maybe your risk appetite itself is increasing?

Thank you. So with regards to your first question about overseas insurance and our outlook for that, as you point out, the rate is softening in all lines of business, excluding casualty. I think we continue to see that trend, and that's our assumption. If you exclude Aspen's consolidated effect and on Sompo International stand-alone basis, they're increasing top line, we're expecting plus 6% increase in top line this year. This is slightly slower than the pace of increase in top line from before, but this incorporates the difficult rate increase environment, excluding casualty that you have referred to.

We don't want to push too hard on the top line growth on the back of weaker profitability. That's something that we absolutely want to avoid. So that is the market environment. So taking that into consideration. Meanwhile, in case of Sompo International, they are aiming for geographical expansion and they're targeting volume growth next year as well. In that sense, this will sustain the top line growth to a certain level. So that's the plan.

The second question on M&A. Sompo International, the people there today are prioritizing PMI. There's no doubt about that. Meanwhile, what about their M&A appetite? Has it been low before and now getting stronger? No, it's always been strong, and it continues to remain strong. M&A deals in case of overseas, we may have opportunities to do bolt-ons by buying similar businesses as current SI or we can buy businesses with different market cycle and with different risk.

And in those deals, for example, maybe there will be less PMI work compared to Aspen. So they are looking at wide opportunities. Meanwhile, we don't want to do deals that would disturb PMI, but I think we're still open to other opportunities. And PMI, we don't want to take like 6 months, 12 months. We don't want to go many years. It's just a matter of time. Now M&A is not only about overseas, but also opportunities in wellbeing exist. We are thinking of offering solutions, one platform. And we can assume filling in the hole with M&A as well.

If possible, I have one follow-up question. For example, in Europe, whether it be life insurance or pension risk or domestic life, do you find that is anything that is more interesting to you more so than before?

I am not able to comment on individual cases. And with regards to your question, do we have more heightened interest compared to before? No, it remains unchanged from before.

Next question is from Sakamaki-san of Mizuho Securities.

Here is Sakamaki, Mizuho Securities. I have 2 questions. First, about ROE and how to think about it. Without any adjustments for this fiscal year's ROE is set at 11%. So there's a big gap with the target, 13%. And as you continue to sell strategically held shares, there will be more downward pressure on ROE. But you're saying that organically, you would like to -- the target at 13% in a stable manner. But organically alone, do you -- to what extent you can use your capital, you think? That is the first question.

And the second question is about rate hike of automobile insurance. On Page 50, on a J-GAAP basis, 102.2% is your forecast. And there is a gap also with the 95%, for example. So is there any room to accelerate the rate hike pace because you are rather on a conservative side because of the peers. Is there any possibility of change in the stance as to rate hike? So organically, can we really target at 13%? I think that's the question.

So this year, we exceeded 13%. We were lucky without overseas business, it's around 11%. Next year, it will be in the order of 11% as well. To be honest with you, there are so many things that can be done by Sompo Japan and Sompo International to improve ROE organically. If we work on these things, maybe not in 1 year, but in mid- to longer term, we will surely achieve around 13% ROE in a stable manner.

As to your second question, the pricing of Japanese automobile insurance. As you mentioned, on a J-GAAP basis, combined ratio for FY 2026, 102.2% is our expectation. As you know, because of inflation and accident ratio, well, the actual numbers are not necessarily in line with our expectation.

So for example, FY 2026, in July, we are planning to have additional rate hike in a flexible manner or this year, what will be the level of unit price or the accident ratio and what will be the gap between expectation and actuals? And in any case, if we think that the profitability is getting worse, then we will offset it by raising rates or more than that, applying -- by applying more detailed segmentation so that we can take only good risks in other words, by applying some various risk selection at the measures, we will be able to achieve 95% level of combined ratio, and we will target at it on the midterm, and that policy remains intact.

Supplementary comment for automobile insurance. So the inflation continues for a while and then the unit price starts to go up. And to follow that trend, we raise our rates. If that's the only thing we do, then we would lose our customers someday, that's our concern. So not just raising the premiums because in the past, there used to be 2,000 different risk segments. And now we have 15,000 risk segments to apply appropriate rating depending on the level of risks, and we take pride in saying that we have made lots of the progress compared to the peers, and we have changed our operation using AI for the -- to avoid fraudulent cases and the detection rate is also improving.

And for example, DRS with whom we have now a tie-up as we announced the other day, and there is a hail is for the secondary peril. For the JPY 10 billion or JPY 20 billion level of hail damage to which there is no reinsurance and actually something like that happened 2 years ago, using DRS services and technology, we can repair the property damaged by hails instead of replacing the whole roof, we can take such measures. And by doing so, we can reduce the claims payout by about 30%.

Next is from Tokai Tokyo Intelligence Laboratory, Mr. Majima.

I'm Majima. I have one question. On Page 4, you have FY 2025 results and guidance. Your domestic P&C investment income plus JPY 15 billion -- overseas insurance, plus JPY 15 billion. Meanwhile, on Page 5, this is FY '26 forecast. There's no numbers on the contributions from investment income. But you said earlier that there's a significant increase in unrealized gains from the funds. How are you pricing in investment gains and losses for domestic and overseas in FY 2026?

Mr. Majima, thank you. With regards to domestic P&C, please look at Page 19. We have a waterfall chart. For domestic investment gains and losses, it is almost all flat or slight increase. That is what we are forecasting. As you rightly understand, sales of strategic shareholdings will bring less dividends year-by-year in billions of yen, but this will be offsetted by gains from funds. So we have incorporated that.

With regards to overseas, please turn to Page 34. We show you the net investment income there. For this fiscal year, this is in dollar basis, but we are forecasting approximately $240 million increase in investment income. This is primarily due to the consolidation of Aspen's AUM increase, which will contribute on a full year basis. So this is the major factor. I hope this helps your understanding.

So next question is from Niwa-san of UBS Securities.

Here is Niwa speaking. I have 2 questions. The first question is about ESR on Page 14. And I'd like to ask you about 2 points of view. For March 2027, what is your forecast about ESR? And for March 2026 and how you evaluate it? Compared to the peers, probably your ESR seems to be the highest. Do you really need so much of the capital? Because I heard in this meeting that you do need this level of capital. And as to adjusted profit and IFRS, the gap there, meaning in terms of the proceeds of sales gains of the stock and shares for this year or next year, is it possible to make some adjustments so that you can channel the sales gains more to shareholders' return?

Niwa-san, thank you for the question. So as of March 2027, what is the forecast for ESR and of course, there are some variables involved, accumulation of profit and the reduction of strategically held shares. They are positive for ESR, while the basic return and the return coming from the proceeds of sales of strategically held shares are negative. On the netting basis, it is possible to see 10 points to 20 points of the increase of ESR with other elements being constant.

As to your second question, do we really need so much capital? Well, assuming a large scale of M&A, rather than making a big return right now, we would like to secure the capital for future investment. But it is not the case that we can use all the excess capital for M&As fungibility included, we would like to secure the certain amount for the future investment rather than making big share buyback right now.

I don't know if you can answer this question. But do you think that you have the highest capital ratio in this country? Or are there any elements that we should take note such as model revision or any elements in terms of comparison with the peers?

We know that we are relatively at a high level. But as to ESR calculation model, basically, it is not the case that we are using special model. So there is no special factor or element involved.

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

[Interpreted] Yes. Thank you for joining us today. First, please turn to Page 3. Last week, we announced our first half results and had the earnings call. So I will skip the details on the numbers. But in a nutshell, I would say that we are making good progress over the numbers. But looking at how rapidly the environment is changing and the magnitude of the change as well as the uncertainties, if we consider that, the reform that we have embarked on is still not concluded.

As for the first half results, we exceeded our initial guidance. And I think that is partly thanks to the efforts that we have been making to date and also partly driven by the external environment. So we should not be just focused on the short-term results, but we will carry out what needs to be done. So our efforts will not bear fruit overnight. And in some cases, our efforts may bring results exceeding our initial expectation. And I think that is the destiny of the Insurance business.

Moving on to Page 5. I would like to talk about the 2 [ domestic ] targets under the mid-term management plan. The ROE target and also the EPS growth. Regarding the EPS growth, we are growing -- exceeding the initial expectation. And for ROE, we are making steady improvement, but we need a further improvement to the next level.

And moving on to Page 6. Here, I would like to talk about the initiatives under Sompo P&C. Regarding the initiatives with Sompo P&C, it's on Page 6, please. We are executing what needs to be done. And we have achieved some quick wins, but we are also carrying out initiatives, which will bring about long-term benefits. So in terms of the numbers, we have reinsurance strategy, leveraging on the scale and also for investment as a quick win, but we are already achieving some benefits.

And for Sompo P&C, the initiatives are done jointly with Sompo Japan and Sompo International. And also, there are other areas where Sompo Japan is taking the lead for initiatives like SJ-R and also other initiatives that's led by Sompo International. So it's a mixture of different initiatives. And we are already achieving some quick wins. But as I said earlier, updating the corporate culture and also walking away from focus on the top line. Those are things that cannot be changed immediately. Also, we have this unwavering determination to move forward without going back. For Sompo Japan, we are trying to build the underwriting culture, and this is the key. We are making tremendous efforts to achieve this. And we are getting a lot of support and stimulus from Sompo International, including trying to improve the portfolio, controlling the line size and also managing the limit.

We are trying to walk away from the traditional industry practices, which would also require close communication with the customers. So we will focus on our path and move forward by tenaciously carrying out these initiatives. And in terms of the numbers, you can see improvement for combined ratio as well as adjusted profit.

On next page on Wellbeing on Page 7. We have communicated about the concepts over a number of times. We want to make the aging society a positive society. So that's why we are addressing 3 concerns. So from the phase of concept, we are shifting to a phase of implementation this year. So on October 1, in order to accelerate these efforts, we have established a new entity, Sompo Wellbeing to promote these initiatives. So some things that cannot be addressed single handedly have been covered by 3 entities Connect and Be Connected to support the individuals by extending the services so that we can make a positive impact to the aging society.

Page 8, please. This is regarding the growth strategy and growth investment. We have organic growth and also inorganic growth. Regarding the inorganic growth for M&A, recently, we made the announcement regarding the acquisition of Aspen. Also sourcing the deal and working on the deal and doing the PMI is something that we will carry out solidly. At Sompo International, organic growth, i.e., the geographical expansion is what we have been rolling out to establish new offices and also to hire new underwriters. This is enabling us to make steady growth.

For Sompo Wellbeing, in order to address the 3 concerns and also to support the individuals lifestyle with that concept, on top of that, we are looking at the new opportunities or new services. we need to develop or create those services in order to fill in those missing pieces. One methodology is to try to grow organically, but to try to gain those pieces through inorganic M&A opportunities. So for this, we are now shifting to a phase of implementation.

Moving on to Page 9. This is my final page. In order to realize our purpose, we will try to enhance our resilience and also Connected and Be Connected. We'd like to make sure that we continue this strategy and to become the truly global company born in Japan, we will not stop our efforts. In the medium term, what we are committed to is the JPY 500 billion in adjusted profit and market capital of JPY 6 trillion. So fiscal 2030, that is the deadline and how can we do this earlier than that? And the JPY 500 billion target, can we exceed this level? So those are the things that we are discussing right now. And in May, the new Sompo story is something that I'd like to share with you. And from my side, about the group-wide strategy, that's all that I wanted to say. And I will hand the microphone to Jim. Thank you.

Thank you, and welcome. I'd like you to turn to Slide 11, where we talk about the pillars of success for Sompo P&C. As Okumura-san mentioned, Sompo born -- Sompo is a Japanese company born and truly global. To do so, we need to operate more than just P&C and Wellbeing. But when we looked at the global P&C businesses, we were operating as 2 separate organizations, Japan and overseas.

And so in April of this year, we brought the 2 organizations together in a form of communication and joint management structure. We focused on reinsurance, which began approximately 2 years ago to present ourselves to the marketplace as one organization. This allowed us to utilize the size and scale to negotiate better terms and conditions, not only on a reinsurance basis but of our overall global relationships with distribution partners.

Over the last several months, we focused on building investment strategies, operations and IT, underwriting, human resources and risk. And now we're going to talk about 2 of those in particular and the first one being investments, and I'll hand over to Nick Burnet.

Thank you, Jim. On Page 12 of the presentation. As Okumura said -- San said, with the segmentation of Sompo P&C, we are starting to see the benefits associated with being one approach to the market. The alignment under Sompo P&C brings together one risk appetite, optimization of capital and investment strategy. This is expected to enhance operating income or adjusted profits by up to $50 million before taxes.

We have created a new investment committee to drive the strategic asset allocation across Sompo P&C. This allows us to determine the balance sheet to get the best risk-adjusted returns based on capital risk appetite of local balance sheets, but also allows us to invest into larger increments and drive more attractive fees. We have established governance, leveraged capital, shared our strategy with our investment managers and have begun the consolidation of investment strategies. And while using our global balance sheets to attribute the reinvestments globally, it also allows us to leverage our global relationships and get the best access to managers across the globe.

Finally, we have begun the integration of global systems, which should bear fruit when we integrate Aspen, which will give us even more scale. I'll turn it back over to Jim.

Thank you, Nick. On Slide 13, I'd like to talk about some of the operational effectiveness that have been put in place and are being put in place within Sompo Japan through the close cooperation. Number one, we've identified clear ownership and accountability with one person owning the operations and IT responsibility across Sompo Japan. We've identified product rationalization. We've identified operational efficiencies through system integration, and we focused on cost savings and have identified a target of JPY 30 billion to be achieved over the next 3 years. We utilize this and we've already demonstrated it through vendor rationalization and vendor negotiations, looking at vendors who supply both our international business and our Japanese business and negotiating as one. We are slowly becoming a more data-driven organization, making decisions based on the best interest of the organization.

I'll turn over to Ishikawa-san for the next 2 slides.

[Interpreted] Thank you very much. So from my side, I'd like to talk about the domestic P&C, and I'd like to talk about the progress. Now in one word, we are on track. Now looking at each KPI, we have exceeded the all in all KPIs. And so in achieving MTMP, we are making the very solid progress. Now first of all, on Page 14, you see the ROE by business and the 8.3% was our initial forecast, and we have likely to achieve 12.5%. For the fiscal '26, our target was 10% or higher, and we are likely to achieve this or go beyond this.

The second point is combined ratio, and we are likely to achieve 95.6%. So our target for fiscal '26 is 95% or less. So we are likely to achieve that target as well. And on the right-hand side, we are showing the reduction of the strategic shareholding and we are doing well on this area. And so the target of the sales has been increased from JPY 200 billion to JPY 250 billion. Now in achieving the targets of the MTMP, we are almost there. So we'd like to continue with those initiatives so that we can show you the concrete results.

Going -- moving on to Page 15. This is the qualitative explanation about the domestic P&C, there are 3 pillars. And the first is to make sure that we make progress in the business improvement plan. And the second is through SJ-R, we want to improve the profitability and enhance the resilience. So to work on the transformation of the revenue foundation. The third is through the cultural transformation, we want to solidify the business foundation. In the middle, we are trying to regain the trust. Currently, we are executing 183 initiatives and 75% out of them have already reached effect lasting status. So we are making a good progress in making improvements. In the middle, we have earnings structure reform and enhancing the revenue management by segment and bottom line focused sales transformation. And also the claims service that -- the enhancement of the fraud detection, we are making a very solid progress.

And the third pillar regarding the foundation of the business, we are trying to change the cultural -- corporate culture and also we are increasing investment into human capital. And we're also trying to walk away from the traditional market practices. And by enhancing our insurance and also the services delivered to the customers, we are trying to improve our basis so that we have been making good progress in trying to achieve a balanced and sustainable growth. So from this year, we have shifted to the Sompo P&C structure, and we are building a more robust business framework and accelerating transformation by getting the support from the overseas expertise and talent.

Thank you. On Slide 16, you see the targets for Sompo International, and this is based on an IFRS4 basis and on a calendar year basis. And as you can see, our target over the next -- till 2026 was to generate operating income of $1.5 billion. The 9-month 2025 is slightly below prior due to the first quarter California wildfires. However, as we look towards the fourth quarter and end of -- the last quarter of 2025, we see benign cat activity. And so we expect to recoup that and become much closer to target for 2025.

On the GWP target for growth initiatives, we indicated a $1 billion target of GWP from all of the growth initiatives. This is representative of our inorganic growth strategy -- sorry, our organic growth strategy as opposed to the inorganic investments. And it was comprised of a number of countries and initiatives that I will talk about on the next slide. But as you can see, the target of $1.5 billion, we have achieved approximately $760 million after 9 months. And so we feel that we are well ahead of target in achieving that goal. The final goal of 13% ROE was achieved despite us holding additional excess capital in order to prepare for acquisitions, which we have announced with respect to Aspen. It also is an unleveraged number and the underwriting results are continuing to perform very well, both on an [ accident ] year, underwriting basis and on investment income basis.

As you move to the next slide, Slide 17, as I mentioned, $760 million. You can see from the 3 different areas in North America. While the North America is an established market, there are several smaller markets and pocket markets within North America and investing in cities and offices such as Denver, Houston and Miami in 2025 -- end of '24 and '25 have generated new business that we would not have otherwise seen. And as you look into 2026, we are exploring potential new openings across North America. I would also include Canada, where we have achieved licensing of our business in Canada and is a new market for us, one of the -- I think it's top 7 global markets in P&C. And so a clear miss for us over the last years, but a great investment opportunity for Sompo.

As we look into the U.K. and Europe, the U.K., similar to the United States, is a mature market. However, we've invested operations into Birmingham and Manchester and access those markets that they typically would not have seen in the London market. We also continue to invest in the expansion of our business throughout Continental Europe, opening offices in Italy, in Germany, in France and Spain and expanding in Switzerland.

In Asia, we continue to invest into the hub of Singapore in order to attract more business that we might not have seen in the different geographies and capitalize on our brand and reputation that we have established over many years in many of the countries across Southeast Asia. Nick?

Yes. If we go to Page 18, we just wanted to give you an update on the Aspen transaction. And although we don't have all the answers, we wanted to share the progress that we've made to date. The Aspen acquisition had 4 strategic pillars for Sompo. As we have shared previously, we were taking, and as Jim just stated, a build versus buy approach for strategic growth in our targeted growth markets. But we stated publicly that any acquisition that would accelerate this growth would be interesting to Sompo, and Aspen accelerates our strategy in the U.K. and in the U.S. specialty business. It turns us into a top 10 P&C reinsurer. It provides us access to Lloyd's specialty market and access to 80 markets globally.

And finally, it provides us with the ability to access third-party capital through Aspen Capital Markets. And we also expect to gain benefits from scale, capital optimization and synergies.

And if we go to the next slide. As we shared with you when we announced the deal in August, we believe the transaction will provide expense synergies as we find opportunities to integrate and harmonize systems, co-locate offices and staff where appropriate and evaluate our legal entities for operational and jurisdictional overlap. Furthermore, the revenue base of Aspen is complementary and Aspen Capital Markets gives us the option to access third-party capital. Finally, we expect to get capital efficiencies as a result of improved diversification and the desire for the potential uplift in the ratings of Aspen.

If we go to the next slide, Slide 20. There are many questions around the regulatory time line for which we can't predict the outcome. But what I can tell you is that we, Sompo and Aspen have achieved all of its filings in a time line consistent with receiving regulatory approvals by the first half of 2026. Outlined on the left side of the transaction are the main jurisdictions that have to approve the transaction.

I'm also pleased to announce that the antitrust waiting period has expired and no issues have been raised, and we have even seen 1 or 2 small regulatory approvals. We are hard at work preparing for day 1, which includes having an opening balance sheet and IFRS 17 and other accounting standards, which will start the journey of realization of all the synergistic elements of the transaction. And Jim, I'll turn it back over to you.

Thank you, Nick, and to Slide 21. When I sat in front of you 4 years ago, I committed that we would continue to grow the business overseas, that we would look for organic and inorganic opportunities. But if we could not find the right inorganic opportunity, we would invest and build. And I'm pleased to say that over the last number of years, we have achieved that, and we will continue to achieve that through investing in our business and growing in the markets that we currently operate in. I'm very pleased with the Aspen pending acquisition. As Nick said, it brings many things to our organization. It brings diversification. It brings access to different forms of capital. It makes us a top 10 reinsurer in the marketplace. It gives us access to Lloyd's, which is not new to Sompo, but it is different than in prior years. And so many of the questions have been, are we still interested in the Lloyd's platform? And the answer is, absolutely yes. We're getting a top-tier team coming and operates in the Lloyd's market that has generated the performance that has been envious of many other markets in the Lloyd's business.

And so we are very excited about everything that is happening. And again, we anticipate a Q1 or Q2 first half closing, but we are very much been active with working with Sompo and Aspen in terms of the integration. And so I'm looking forward to any questions that you may have with respect to Aspen and Sompo. Thank you.

So now we'd like to move on to the Wellbeing, and I'd like to call upon Mr. Oba.

[Interpreted] Yes. From the 1st of April, we started as a Sompo Wellbeing. So as we have Sompo Himawari, Sompo Care. And in addition to that, we have a corporate wellness, Sompo Healthcare Support and Wellness Communications, also the RIZAP, the 5 companies in total. The recent business results is that in terms of the adjusted profit, we are making good progress. As for the full year forecast, year-on-year progress and also vis-a-vis the targets, we will make sure that we achieve all of those targets.

As for the Sompo Wellbeing as the future growth, there are 3 major pillars. First, each company will make sure to grow. So that is the organic growth. And in addition to that, on Page 23, that is #2 and #3, so those are the areas that the Wellbeing business will start as a new structure or new organization. The second is value up growth. So going beyond each business, we will try to offer value to the customers so that we can grow. And M&A strategy number three, we would enhance our proposals, and we would accelerate an M&A and also the alignment. And as a result, in 2030, JPY 100 billion or higher adjusted profit is what we would like to aim for.

Going on to Page 24. Now one of the growth strategy is the value up growth. And this shows one of the symbolic initiative. As Okumura mentioned earlier, on the 1st of October, we established a new entity in here for the nursing care -- nursing care will be the beginning so that we can try to solve the various concerns of the customers. So we made a start of this. And the -- it starts from the nursing care consultation and we introduced the facility for the nursing care and then go to the inheritance or sale of the real estate and the nursing care for their parents and also the -- in dementia and so forth, we would like to link this to the consultation of the health of themselves. We'd like to take advantage of the expertise of Sompo as well as other business entities so that we can build this opportunity -- the models to provide those opportunities to the customers. And we'd like to apply this to BtoBtoE on the right-hand side. So we would work with companies and for the employees of those companies, we would provide the support of their health. And one of the social issues that we face is that the business carers leaving their work for caregiving. So we will be focused on providing program for those people. As for the mergers and acquisitions, we would like to provide the optimum solutions to the customers and the 3 concerns that we'd like to face and to alleviate those 3 concerns, the different factors and the functions will be enhanced through the potential M&As and others.

Page 25. This is for the domestic life insurance business. As for the adjusted profit, we are doing well. And for the full year, we are likely to achieve the target. However, for the new business NP, it is lower than our plan. So we are still faced with the challenges. But for the premium in-force, we are seeing the growth as well as the less translation or churn of the insurance contracts. And so insurance and health support, which are the pillars of the life insurance, we provide Insurhealth, and this is -- this has been the eighth year and the number of the contract exceeded 2 million and also the amount of the premium exceeding JPY 160 billion. So we focus -- continue to focus on Insurhealth. And when this business expands, the profitability of products would improve. And so in December, the variable product will be launched and also to support the health of the enterprises, we will start -- plan to launch the new product early next year.

Page 26 is the nursing care business. We are doing very well in the nursing care business. And for this fiscal year, the utility cost and also the food costs are increasing. So this has been the headwind, but we offset that and we are likely to end with a higher profit for the full year. The reason for that is the accumulation of the efforts at the front line and the better productivity of the nursing care operators and what we call Mirai no Kaigo or future nursing care, this initiative has been effective.

More specifically, here, we are trying to visualize the operations and standardize the operation and using the technology or data, we are reviewing the operation so that the time and personnel, which we can save can work on the better quality. And so the revenue from the nursing care insurance, we would like to expand the revenue. And as a result, we would like to improve the occupancy of the facilities and to improve the profitability. So we'd like to continue with those initiatives. So it's not just Sompo Care internal initiatives, but we would like to also provide consulting services to other businesses.

Number 27 is the final page. This is the corporate wellness that we would like to focus more on with many companies supporting the health management, we have the contact with those enterprises and customers, and we would like to take advantage of that to improve our revenue base and also the profitability.

[Interpreted] Now we would like to open up for your questions. [Operator Instructions] Also Mr. Muraki from SMBC Nikko. Please, unmute yourself.

[Interpreted] Can you hear me?

[Interpreted] Yes, we can hear you.

[Interpreted] This is Muraki from SMBC Nikko. I have 2 questions. My first question is regarding your future M&A strategies. On the appendix presentation, Page 6, you have JPY 900 billion of investable capital. And through the sales of the strategic shareholdings, this is going to increase. So after Aspen, are you considering a large-sized M&A or bolt-on M&As? When would you like to execute those next M&A?

The P&C companies in the U.S., the share price is coming down but it is also said that the softening of the market may last for a long time. So you have to decide if it's wise for you to make an early acquisition or wait until the later stage. So my first question is regarding your M&A investment going forward.

And my second question is regarding Sompo P&C's simplified integrated operation that you presented. In the appendix presentation, on Page 10, you talk about the integrated group investment, what was the progress to date? And also including Aspen, are you going to make a further integration, including Aspen?

Already in the first half, the junk bond portfolio increased to 9.9%. And compared to the others, your exposure to the non-IG bond has increased. So are you willing to take more risk in the investment portfolio? That's my second question.

And also, for streamlining the operation, you say that the Aspen integration is going to complete in 2029. Why is it going to take 4 years?

[Interpreted] Yes, Muraki-san, thank you very much for your question. So I will make a quick response. And regarding M&A and the total capital available, the group CFO, Mr. Hamada, will respond to that. And also regarding the market outlook, Jim and Nick can complement. And for the integrated operation of Sompo P&C, investment can be handled by Hamada-san and Nick and maybe operation part probably should be answered by Nick.

So first, regarding our philosophy for M&A strategy, as Muraki-san mentioned, there are many factors including the ones you indicated and also our unique factor of when we are going to be selling the strategic shareholdings. And also for the hands-on M&A, we are going to prioritize the PMI of Aspen. But there are also a variety of different M&A opportunities. Looking at our capital and also in order to accelerate the recycling of our capital, we will sit tight to explore many opportunities. We mentioned in the previous IR Day, Aspen is not the end of the story. So we're looking into opportunities to buy overseas insurance companies as well as M&A opportunities for the well-being business. So all the business owners are exploring those opportunities.

And regarding your second question, for the integrated operation of Sompo P&C, looking at the different entities, maybe the exposure to high yield has risen, but we are looking at the risk one by one very carefully and also looking at the group-wide portfolio in a holistic manner. So for the detailed numbers, there are things that we can share and cannot share, but it's not as if we are aggressively taking all the risks. So I will stop here. And regarding the future M&A strategy and also the funding of the M&A, I will ask Hamada-san to respond to that.

[Interpreted] Yes, this is Hamada. Thank you, Muraki-san, for your question. Regarding Page 6 on the appendix presentation, if I may clarify this, right now, we have JPY 0.9 trillion of capital available for investment. This is after the Aspen acquisition. And the capital generation under the MTMP, we have about 18 months and how much capital can we generate, that we are calculating using many factors. And roughly speaking, I think we will have incremental JPY 1 trillion of capital. And within the next 18 months or so, deducting the shareholder returns. Prior to Aspen, I think we said JPY 1.5 trillion. So that capital availability would not change materially. And this is somewhat impacted by the stock sales held by Sompo Holdings. But we don't intend to use all of this in FY '26, all at once. So we will have discipline to explore M&A opportunities. So regarding the M&A market outlook, can you comment, Jim, please?

I think we are seeing a tick up in some of the activities, as you've seen through some of our competitors in the marketplace. They're taking on different forms, both M&A and investments. I believe that over the last 4 years, we've demonstrated a very disciplined approach to looking at investments and an M&A activity, and we will continue to do so. The market will go through cycles. It always has, and we'll have to manage through that, but we'll take a longer-term view about adding business that's accretive to Sompo Group. Nick, is there anything additional to that?

No, I think -- as you said, Jim, we have seen an uptick in many different forms and styles of the way the transactions are coming through, and we'll continue to monitor the marketplace, as you said.

[Interpreted] So Nick, can you talk about the investment side of the business, the initiative by Sompo P&C and also the exposure to the high-yield bonds?

So as we've stated, we're taking one approach as we think about Sompo P&C and the investment strategy and how we look at the strategic asset allocation across all balance sheets. So what we're trying to do is find the efficient frontier and make sure we have a balanced portfolio and warehousing based on our risk appetite these investments. So we're repositioning, rebalancing. We're using leverage to benefit from our size and scale with investment managers to reduce our fees. We're optimizing our strategic asset allocation, and there may be some shifts, but I would say it was more of an underweighting to that asset class, the high-yield asset class rather than taking on a bigger strategic footprint as it relates to high yields looking forward. So we've started to integrate this mindset. We've started to rebalance and reevaluate the portfolios. We're looking at each of the individual balance sheets as we do that to make sure that those investments are warehoused on the balance sheets where we get the best risk-adjusted return.

There was a question on Aspen.

Yes. So I think the last question that you had was about 2029. I think it relates to synergies. We will continue to drive the synergies as a result of the transaction as quickly as possible. The 2029 is when we have a fully integrated run rate expense savings in 2029. So that does not mean we won't start that journey on day 1. It just means that our expectations between the integration of systems, bringing the legal entity together, optimizing along and harmonizing along the whole synergy approach by 2029, we should have fully achieved those synergies.

Next, BofA Securities, Tsujino-san, please.

[Interpreted] First question is about overseas. The other day at the earnings call, this year, it will be with the soft power, you'll be changing the portfolio significantly. And because of that, expected loss rate was increased and the cat rate is lowered, but at the same time, the expected -- the loss rate is increased. And so this offset with each other, but the investment is up. That's what you said. Now this change of the portfolio, by changing the portfolio about the know-how of doing it, I'm sure that that's something that being done at the Sompo International. But how -- where do you pay attention to? What are the areas of the focus and increasing the expected loss rate, you are being conservative. So if it is something that is newly underwritten, so next year or in 2 years, the assumption probably were too high, you might lower that. Is that something that could happen? So that's my first question.

And second question is about the domestic business. So underwriting in Japan, many things are doing well, you said. And as for the auto, at the beginning of the year, in comparison to the loss rate, the cat loss ratio was increased slightly. And so most recently, when you look at the year-on-year comparison, last fall, I think that components and other parts unit price went up. And the claim unit price is up year-on-year, I hear. So for the next fiscal year, the claim unit price and also the frequency, if they do not come down, 6% or 7%, price increase might be necessary next year or even every year. So if that is the case, can you move very quickly or flexibly to accommodate that?

[Interpreted] Thank you, Ms. Tsujino. My first question -- your first question is about the international overseas business. Well, in building portfolio, there are different perspectives. So market rate environment and also cat volatility control there are different factors. So this time, the market as a whole, the cat and property rate are coming down and casualty rate for us was favorable. And because of that, we increased the percentage of weight. And as a result of it, expected the loss rate of the casualty is high. So to secure a stable profit and then the loss rate is slightly up. But concerning that, Nick can probably give some more details.

As for Japan, there are innovation of the systems and others. Now we are creating the situation about the infrastructure, we are -- I am also focused on that. I'm concerned about that. So it's not just increasing the rate and to work on the cost, that is one of the basics, but we would like to, of course, provide a value that is convincing to the customers and to make sure that we do the portfolio management to increase our productivity and reduce costs. So that is the effort that we should be making before raising the prices. And as for the timing, now there have been some systematic restrictions, but we would like to be able to do that flexibly in the system development and also to shorten the long-term contract so that we can increase our profit. So that's why -- that's what we are doing at the Sompo Japan.

And as for the portfolio-related way of thinking and the higher expected loss ratio, I'd like to ask Nick to give some additional comment.

Thank you, Okumura-san. I think as we see a few things happening, as Okumura-san said, the mix shift has created some increase in the attritional loss ratio. But the other thing is we have hyperinflationary accounting in Turkey and almost 1 point of the attritional increase is coming from that hyperinflational aspect of consolidation through our balance sheet. The other aspect of that, though, and the converse of that is we get the investment income and it offsets. And part of the reason our investment income is going up is because of the hyperinflationary accounting. So through the first 9 months, when we look at the 2 points of movement or 2.3 points of movement on our combined ratio, some of that driven by mix into the casualty business, where we're continuing to see good rate increases that make us continue to shift towards that. The second part of that is approximately 1 point is as a result of hyperinflationary effects through Turkey, which we get the offsets in investment income as we get the benefits through the investment income line. And then the third is that because of the California wildfires as we look through the first 9 months on an IFRS4 basis, although we saw that there was benign cat in Q2 and Q3 and Q1 because of the California wildfires. So as we look to the underlying and we look to the attritional loss ratio of the underlying, we feel very good about the outcome. There will be this hyperinflationary effect that we will continue to see with hyperinflationary accounting, which is offset in investment income.

[Interpreted] As for domestic matter, I'd like to ask Ishikawa-san to comment. Well, first of all, about the auto insurance and the impact of the inflation. In fiscal '25, the initial forecast, the CPI and the corporate price index, different factors are being considered to come up with this. As for this fiscal year, at the beginning of the year, we thought that it's going to slow down a little bit. So compared to the previous year, it was around 5.7% or so increase. But as Tsujino-san pointed out correctly, up to the interim period, it was 7%. So there was an impact of the inflation. In the medium to longer term, this inflationary situation might continue. It might come down, but about from 4.5% to 5% range, that is the range of the inflation trend, which is likely to continue. So auto insurance the -- to sustainably increase in the rate and we need to face the higher unit price.

And as Okumura-san mentioned, some on the -- if the inflation accelerates, or the environment changes, which is beyond our expectations, of course, we have done the preparation from that system perspective. And in the past, we looked at the revision of the rate once every year. But from -- now that we can be more flexible and increase the frequency. So we have already built such system. In a similar way, the long term -- as for the long-term contract, currently, the percentage of that is being lowered at the corporate-wide level. So long-term contract, when the percentage goes down, the rate and also the impact on the product price revision and also the policies in force, we can make sure that those can be more flexibly reflected. And the expense -- to optimize expenses and in the claims payment, we would like to make sure that we do so. So appropriately balanced premium and the cost reflection is something that we are currently working on.

Next, Watanabe-san from Daiwa Securities.

[Interpreted] This is Watanabe from Daiwa Securities. I have 2 questions. In the appendix presentation on Page 9, I want to ask about dividend. So you mentioned that when you announced the Aspen deal, the EPS growth rate is elevated at roughly 18%. So does this mean that the DPS growth outlook is going up to 18%? And here is, you -- are you considering just a single year of FY '26? Or are you considering multiple years, including '27 and beyond?

My second question is on Page 10 regarding the exposure to private credit. Bottom right of your group investment outside, 10% is foreign securities and others. How much exposure do you have to private credit? And I think there's an exposure at Aspen. And can you also tell me the exposure at Aspen? And regarding private credit, there are uncertainties. How do you think about the discipline for private credit, including direct lending?

[Interpreted] Yes. Thank you for the question. Also for the shareholder return, I will ask Group CFO, Mr. Hamada, to respond. And on the second question, regarding the group-wide investment, we are actually having the investment committee. So I will have Nick respond to the second part of your question. Also, the Aspen deal as well as how we are improving the profitability. So based on those, the EPS growth rate is not just one-off. We expect this to be sustained.

And regarding investment, since last month, we have been hearing some noises in the market. So based on that, at the Board for Sompo P&C in Japan and overseas and also at the investment committee, we have been discussing what kind of impact we should expect from those noises in the market? So at the Board level, we are confirming that. So to the extent possible, Nick, can you share what we are doing for the exposure to private credit? So first Hamada-san, please.

[Interpreted] Yes. So looking at Page 9 of the appendix presentation, it may look like FY '26 DPS growth is going to be 18%. So we have not decided yet. But I was foreseeing that, that will be the expectation of the investors. And overall, the share price is going up, and we would like to place some more focus on dividend to a certain extent. So we are proactively considering the dividend hike. And of course, this is not limited to a single year. So we will look at the EPS growth rate of different years to decide on the dividend hikes for FY '27 and beyond. San-Nick?

So as it relates to private credit, we're not over-indexed, but we continue to monitor the market, and we continue to adjust it and think about it. I won't go into Aspen sort of exposure to private credit as we're not the owners yet. But we don't feel overexposed to it. We're monitoring not only private credit by the type of investments, but also by the industries to make sure that we continue to remain in line with the expectations of the private credit market. Although there have been some defaults in the market, we haven't found ourselves overly exposed to any of those defaults, and we feel good about the private credit that we have, the collateral nature of the private that we have also as it relates to private credit.

[Interpreted] Could you give us actual private credit exposure in Sompo International and Aspen?

So I don't want to speak on behalf of Aspen yet because we don't own Aspen, and I don't know where their latest position on private credit is as they actively manage it. We have less than $1 billion of exposure to private credit in Sompo International Holdings.

Next, Sasaki-san from Nomura Securities.

[Interpreted] Sasaki-san from Nomura Securities. I have 2 questions about Aspen Asset Management. In Japan, the pension fund, the very popular investment strategy, ILS and cat bond were -- have been included for a long time. But in Japanese market, Aspen's asset management, is it possible that this could expand at the accelerated speed? That's my first question.

The second question is about the domestic P&C. In the supplementary material, on Page 23, I'd like to have some additional information. So here, it doesn't mention, but the various initiatives are being taken. What I'd like to know is about the agency's comparative the sales recommendation. I'd like to know what you are doing with the change of the law and the authority, I think that in the full-fledged manner, the Japanese insurance companies or the agencies will be able to recommend the different products based on the comparison. So is it possible for the market share to drastically change in Japan? For example, in auto insurance, manufacturers and the life insurance companies were kind of linked with each other. But without the kind of affiliation, would that have a major -- would it create some major change in the positioning of your business?

Could you repeat the first question?

[Interpreted] About the asset management of Aspen, ILS and cat bond. I think that the Japanese pension fund among the pension fund, it was very popular. And in coming to Japanese market, the asset management business of Aspen, is it possible that this business will drastically expand? Do you have such view?

[Interpreted] Okay. Thank you very much. To your first question, I'm not sure who is the best person. I personally think that the drastic expansion, probably not really. In any case, the underwriting risks and the matching of the capital market, even if there is one side, it's not going to lead to the major expansion. But I would check, ask whether Jim and Nick might have some comment later on.

As for your second question, I would ask Ishikawa-san probably to respond.

So this comparative sales promotion. And not just that, but we are faced with various challenges and we need to respond to them. So the business practice that we have had until now need to change. And as a result, already, we are seeing the kind of securitization in the market and that's likely to happen. And one of the major impact, including the dealers, whether the -- there will be a major market impact or not, yes, I think that there will be a bigger impact. So let's move -- take the second part of the question about the movement in relation to the comparative sales, Ishikawa-san. And for the first question, I would ask Jim and Nick to respond. Ishikawa-san first.

[Interpreted] So yes, about the enhancing this recommendation based on the comparison of the different insurance, whether this would have a major impact on our business. Now the agencies and distributors, of course, they have been aiming for the healthy business management. And it's not just this comparative sales, but there could be -- I think that one of the assumption is that there will be some selection of the different insurance companies. And now we have the rules developed. So this would lead to the changes of the business. But if you look at the total picture, the change of the market share, drastic change -- that is not likely currently. But individual distributors and individual contracts, there could be some major changes. So there will be pinch and opportunities. I think we should consider this as an opportunity for us. And as it was mentioned, the variable non-life insurance companies, we deal with those companies. And of course, we have to be accountable for the quality and the system, and we need a very high level of quality management. On the part of the distributors in relation to the cost, they will probably reduce the number of the peers in companies they deal with. And as a part of it, as for the dealers, they would probably consider reducing the number of the companies to deal with. But at the same time, as I said, from our perspective, this is a pinch, but also consider this as an opportunity. So we would like to make sure that we communicate about our products so that we can increase our market share and also to expand our top line.

[Interpreted] So to the first question about the Aspen, ILS and [ TAM ] would there be a major change in the market? Nick, probably you can comment on this?

So Okumura-san, I agree with you. I mean, when we define major. But I mean, it's already a major presence in the market. It has about $2.2 billion of assets under management. It has $140 million approximately of fee-based income. But it gives us the opportunity with our larger balance sheet to look at all the different opportunities we have underneath the Sompo umbrella. So I think it provides us with the option. But to drastically increase if that means doubling, I don't see the doubling effect of it.

Next, Sakamaki-san from Mizuho Securities.

[Interpreted] Yes. This is Sakamaki from Mizuho Securities. I have 2 questions. The first question is about the ROE target and your commitment under the midterm management plan. At the outset, Okumura-san said that you need the extra effort to further improve the ROE. And at the earnings call and the result announcement day, Hamada-san said that it's becoming more difficult to achieve that target. So for next fiscal year, the ROE target of 13%, how feasible is this? Can you attain this? Or do you have excess capital today and you have opportunities now? So do you still consider to achieve this next fiscal year or maybe in other years? So what is the thought of the management team for the ROE target?

The second point is about the overseas business. In the midterm management plan, you aim to increase the GWP by geographical expansion. But what are different vis-a-vis your expectations such as the softening of the insurance market by different lines of business. Do you see any areas where it may be difficult to achieve the gross premium target? And also in the softening market, how do you expect to grow the premium income? What is your risk appetite for growth?

Sakamaki-san, thank you for the questions. So first, regarding the ROE target, I and Hamada-san will respond to that. And regarding the second point -- it's regarding organic growth in a softening market. What is the risk appetite? And how do we balance with the profit? So I will ask Jim to take the second question. So for ROE target or -- this is a KPI that we upheld. So we have a strong commitment to achieve that. So that said, we are now trying to expand the numerator to achieve the ROE. On the other hand, it has become a little bit difficult because of the external environment. How do we think about the denominator, the E portion? And also, as we are discussing now in the P&C market, there are a lot of M&A opportunities that's popping up in the market. So how do we think about organic and the inorganic growth? And how do we allocate capital for that?

So right now, we are accelerating internal discussion amongst the management team. So I may not be able to respond directly, but 13% is what we had committed to. But on the other hand, the expansion of the corporate value over the medium to long term is something that we are also committed to. So we would like to strike a balance to achieve that 13%.

And on the second point, for organic growth, we are expanding in Europe and I am derailing a little bit. But until last week, I was visiting Brazil. And in 2021, the retail business and the health insurance business was sold. And we sold 50% growth of the premium income. But within 4-plus years, we have been able to recoup that with the commercial business expansion. So it does not get the attention much, but in different regions in the businesses, entities are striving to achieve organic growth. So I will ask Hamada-san and Jim to add some comments.

[Interpreted] Yes, this is Hamada speaking. As Okumura-san said, I don't have much to add. I agree with him. As in the previous result announcement, we communicated that the next fiscal year, we will expect a normalized level of nat cat and our calculation gives us 12% plus. And to raise that to 13%, we have a strong awareness to try to fill in that gap, but it's not going to be easy. So we may say 13% subject to XX. But we have this midterm management plan and the management team is strongly committed to that. But it doesn't mean that by the end of FY '26, Sompo Group would no longer exist. So we will also consider the sustainability and the continuity of our business to strike a balance vis-a-vis investment.

The question of growing in a softening market, I think I would point out that when we talk about softening market, it doesn't mean it's not profitable business. And so as Okumura-san indicated earlier, the property business, we are seeing rate reductions, but we still believe that pricing is still above cost of capital and sufficient to generate the required return on equity and investments that we see. Liability is still priced well and improving. Other markets such as directors and officers liability, we are seeing dramatic reductions. And so we do see that size of that portfolio reducing. However, in many of the markets that we're operating and growing in that we highlighted, we are new to the market. And so we are writing business as new. And so we definitely see still good business in those marketplaces. The 2 things that we need to continue to focus on is underwriting and risk selection is even more important. And the other lever that we control is expenses. And so being as efficient as possible to ensure that we can manage and grow and be profitable throughout the underwriting cycle.

Morgan Stanley, MUFG, Takemura-san.

[Interpreted] Morgan Stanley, Takemura. MUFG I have 2 questions. First is about the next fiscal year, which is the final year of MTMP, the growth of the profit and driver of the profit growth. I would like to know about the image. About the domestic P&C, I think that the improvement of the profitability, I think, can be expected. Is that the case? And as for the overseas business, a bit depending on the life -- line of business, there are some softening. And do you think that you can continue to realize the profit growth? Earlier, Sompo P&C future profitability improvement the portfolio management was mentioned. So -- sorry, JPY 50 million to JPY 100 million, I think, or JPY 30 billion level of the effect can be expected. Maybe I heard it wrong. But as for the time frame, if you can mention that through the operational efficiency improvement. So that's my first question.

The second question is about the in the future plan and potential change of the plan. At the beginning of the session, the adjusted profit of JPY 500 billion and the market cap of JPY 6 trillion. And you mentioned that there's an internal discussion going on that you might be able to achieve that earlier than expected. So about the sale of the shares, is that also included in the potential change of the plan? The share prices are increasing, so it might be difficult for you to reduce the risk, but is that possible to consider or you will be focused on the timing of the future M&A before making the decision. So those are the questions.

[Interpreted] Thank you, Takemura-san, for your questions. So for the next fiscal year, the driver of the profit growth. Organically, I'd like to make sure that SI and SJ or Wellbeing to continue to make the steady growth, and we are taking initiatives for that. And as for the investment, the investment asset is increasing and in the integrated management of the P&C, we would like to do so and reduce risks. As for Aspen, with the approval from the authority from fiscal '26, this will be contributing in a full-fledged manner, and that could be a growth driver as well. But as I said at the beginning, first half this year, the natural disasters were less than what we expected. And because of that, what we can do, for example, portfolio management and to stabilize the revenue, we can control the size and control the limit, we will do everything we can do. But there are other areas that we are unable to control. So how should we capture that? That is something that we need to discuss from now on. As for the detailed numbers, JPY 50 million and JPY 30 billion, those numbers probably can be commented by Nick or Ishikawa-san.

In the medium-term plan or targets being changed. And I mentioned that there is an internal discussion about that. Looking at the market environment, and the sale of the strategic holding and also by increasing our profit, the capital that we can use for M&A will be generated. So what about the timing of the sale of the strategic shareholding? We are committed to the number by the end of fiscal 2030. And if there is an opportunity for merger and acquisitions, we will deal with it in a flexible manner. And we have already reached an agreement with Sompo Japan members and the leaders.

As for the end of fiscal 2030 and the sale of the strategic shareholding, we did receive the question on that. We have held the shares of our customers for a long time. And because of the various reasons, we decided to sell some of them. As for the background and explanation, we would like to make sure that we spend sufficient time to do so that we are accountable for the strategic shareholding. So by 2030, for example, not just making the changes, but rather to sell all of them by the end of fiscal 2030. And also looking at the market situation, we would like to handle this in a flexible manner.

Okay. So for the next fiscal year plan and the growth driver about the SI and SJ, I'd like to have some additional explanation, starting with Jim.

In terms of growth over the next number of years and profitable growth, as I said earlier, will depend on underwriting discipline and expense management in terms of managing that business. We still see pockets of good growth and good business opportunities in terms of expanding into new geographies. But I can assure you, if we don't feel that the business is profitable, then it's not in -- within our appetite, and we won't write it. So -- but we do feel optimistic about that opportunity. We will measure ourselves, as Okumura-san indicated, the closure of Aspen in 2026 would certainly generate growth increase. However, we are going to hold ourselves accountable and measure those separately. And so we'll be accountable for the original targets that we had put in place 2 years ago. Anything to add, Nick?

Yes. We remain committed to those targets, and we hope and we're on track to close out. I mean, as it looks at the 3 targets, Jim talked about the top line growth in our strategic growth markets. We've actually accelerated that by a year. We got to -- we expect to get to $1 billion a year in advance. That's a positive. So that's going to help. Remembering that the fiscal year is a combination of new business but older underwriting years, and we believe the older underwriting years are coming through positively into the results. So that's another positive that we have. And then we have some of the benefits and the tailwinds of investment income. So we feel good about achieving and closing out, as Jim said, the 2026 year midterm plan, and we'll continue to work on developing the next midyear plan and come back with you with our new targets.

[Interpreted] So thank you, Takemura-san, for your question. For the next fiscal year, improvement of the profitability, we will -- we need to continue to expand. And as for the initiatives in the supplementary material on Page 18, this talks about the auto and Page 19 talks about the fire insurance and the major initiatives are shown there. And on Page 21, here, it talks about the expense ratio outlook and there are various initiatives will be taken to reduce that. So in that sense, the -- and to expand the profitability, that is our plan. And SJ-R initiatives, talking about those, -- as mentioned today, there is an impact of the inflation and the repair unit price of the auto insurance is going up and others. So higher expense ratio is expected in the change of environment. But in SJ-R, we are focused on the pricing and the optimization of the reinsurance and reduction of the expenses and to improve the quality of the portfolio. Those initiatives will be continued. And for this fiscal year, about the SJ-R year-on-year, JPY 46 billion effect was generated. So we want to expand that further. So steadily, we would like to continue to expand our revenue. So we are determined to do so.

Next, Sato-san from JPMorgan Securities.

[Interpreted] Yes, this is Sato. My first question is regarding investment. For the existing capability, based on the current capability, I understood the magnitude of the improvement. And looking at the initiatives, you have the group, best group synergy. So through sharing the know-how and expanding the risk-taking or risk capacity, that is not reflected in these numbers. And with the inorganic opportunities, would you consider doing acquisition to buy the expertise or the capacity for investment business?

And the second question is just confirming the numbers. Earlier, you said the ROE target for next fiscal year is around 12% plus. So you have adjusted the net asset of JPY 4 trillion. Is the ROE of 12% based on that number? Going forward, the adjusted net asset, if you are going to retain everything, I think even 12% ROE could be quite challenging. So may I confirm that number, please?

[Interpreted] Yes. Thank you for those questions. Regarding the first question, enhancing the investment capabilities, would we be targeting the investment managers for M&A? In the context of gaining new capabilities to expand our business, we leave all the options on the table. So -- but at this point, what you said is not the target of M&A. And for the confirmation of the ROE target, Hamada-san, can you take that question?

[Interpreted] Yes, Sato-san, you have the right understanding. We have a net asset value of roughly JPY 4 trillion, but this is excluding OCI. So based on that, we are calculating the ROE, and we expect the next year to be 12% plus.

[Interpreted] So JPY 4 trillion multiplied by 12% plus [ SOFR ], that's what you're looking for. Is that right?

[Interpreted] Roughly speaking, yes.

Next, Tokai Tokyo Intelligence Lab. Mashima-san.

[Interpreted] Well, so for P&C, integrated management was mentioned. And SI or International is the commercial, and Aspen is also in the commercial area. As for Japan, Sompo Japan is commercial and consumer and has a big consumer business. So even if you say integrated management, Aspen, SI, Sompo Japan, commercial integration is, of course, possible, I think. But at the same time, the consumer part of the P&C also exists. So you said integrated management. So how should I understand this? Consumer or commercial part is integrated, but the P&C consumer part is not integrated. Is that the correct understanding? About the Sompo Wellbeing, as you mentioned, this is newly established. So about the Corporate Wellness enhancement was mentioned. You have to be speedy so that I think it's better to work on the inorganic growth. So what do you think? Sompo Wellbeing, how you -- what kind of the size of the inorganic growth are you considering? Maybe acquiring the multiple smaller companies? Or if you can talk about the scale or the size of the inorganic growth of the Sompo Wellbeing.

[Interpreted] About the Sompo P&C integrated management, commercial and consumer, we have both, and you are correct. So in SG&A, there are commercial and consumer. And in the area of the consumer in the Sompo International, the Turkish underwriting know-how, and that leads to the claims payment and efficient process and so forth, that is something that we can learn from. And as we mentioned, the integrated management, technical pricing, underwriting, reinsurance portfolio, in addition to those technical size about the organizational design and the investment and the transformation of the corporate culture. I'm not saying that everything that Sompo International does is correct and Sompo Japan is wrong, but we would like to learn from it. And if it makes sense for Sompo Japan to transform the business model and to renew the business foundation, not just the revenue and the profit, we will be aggressively incorporating those ideas. As about the Wellbeing, that's something that we are discussing right now. And from the different perspectives, inorganic opportunities are considered, how can we increase the number of the customers? How can we gain the missing pieces. So we are not really particular about the size or scale, but Oba-san maybe can give us some additional comment from the well-being perspective.

[Interpreted] Yes. Thank you very much for your question. The Corporate Wellness that we will be focused upon, of course, we have to be speedy. As you correctly pointed out, we are working on that.

And to your question, the size of the M&A, I cannot really give you the specific number, but we would like to be disciplined, but there is no restriction or limitation. The way of thinking is that in order to be fast, we have to look at the functional access. So to provide a solution to the customers, what are the missing services or missing vehicles. We can do the alliance or M&A so to make sure that we have sufficient functional access. In the area of the healthcare, the -- in Japan, there are not so many major companies in healthcare. So it's not going to be a big scale acquisition. But at the same time, about the healthcare area. So for example, the retirement funding to provide a solution, the potential M&A or vehicle, there could be different possibilities. So for example, inheritance, real estate, there could be various opportunities in those areas. At the same time, aside from the functional side, the customer base already the companies with a certain size of the customer base, working with them so that we can provide our solution is also possible, and there are various possibilities. So the channel or the companies with a certain level of the customer base, we can probably do the M&A or alliance, and there are various opportunities like that.

So we have gone over the scheduled time. So we'd like to take the last question. Ms. Tsujino from BofA Securities.

[Interpreted] Yes, I have one question. For the 13% ROE target for next fiscal year to achieve that, would you -- I guess you will consider capital adjustment. So earlier, you mentioned about enhancing the corporate value over the medium to long term and to balance things out. So considering all those factors, if you try to achieve that 13% ROE, you will have to do something substantial for capital adjustment, and that could be an issue over the medium to longer term. So my understanding is that you have to consider with a lot of flexibility. So based on my calculation, if you intend to do something, that will be quite substantial and gigantic. And I am excluding the impact of the proceeds from the Palantir stock sales. So should I consider that something big will not be happening because I think you need to manage the expectation of the market?

[Interpreted] Yes. I think you explained everything yourself. Also, our commitment to the market, our short-term commitment and the long-term commitment, how should we balance this out? How do we look at the internal environment and the external environment and the changes on the numerator and the denominator. So we will take a comprehensive view to do something. And I think this is something that the CFO needs to commit. So I will ask Hamada-san to make some comments.

[Interpreted] At the first half results announcement, we mentioned that the denominator was expanding more than initially expected. This impacted by the sales of the stocks held by Sompo Holdings. So we said we may exclude that in calculating the ROE. But as we emphasize the importance of investment, it does not mean that we are not going to do any capital adjustment. I think the key is striking the balance. It is difficult to explain, but we will have a certain level of logic to make ourselves accountable to the shareholders and to present something at the end of next fiscal year.

[Interpreted] I see. So for example, the synergy that you are expecting, would you try to front-load the benefit? Would you make such kind of adjustment in your calculation?

[Interpreted] Well, we have not thought about that. But what's important is when we made this MTMP, we felt that the 13% to 15% ROE target was appropriate. So if we were to exclude something, we will be excluding factors which we did not expect at the time of making the MTMP.

[Interpreted] Mr. Tsujino, thank you for your question. So with that, we would like to conclude today's IR meeting. If you have any further questions, please contact our IR office. Thank you very much for joining us today.

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

I am Hamada, Group CFO of Sompo Holdings. Thank you for joining our earnings call despite your busy schedule. I will go through the first half results and the full year earnings forecast for FY '25 as well as the shareholder return, all of which we disclosed today. Please turn to Page 3 of the presentation.

This is the executive summary. First, the overview of the FY '25 first half results. Driven primarily by a decrease in nat cat in Japan and globally, profitability improvement in domestic P&C business and strong net investment income overseas, adjusted consolidated profit increased by JPY 78.1 billion year-on-year to JPY 247.4 billion.

Next, the full year FY '25 earnings forecast. Based on the first half results, adjusted consolidated profit for the full year is revised up by JPY 77 billion from the initial forecast to JPY 440 billion. Although direct comparisons are not possible due to our transition to IFRS accounting this fiscal year, we expect to significantly surpass our previous record high profit.

Last but not least, shareholder returns. The total shareholder return for the first half of FY '25 is JPY 145.5 billion, including JPY 77 billion of share buybacks. For the full year, in addition to the upward revision of adjusted consolidated profit, the plan for the sale of strategic shareholdings has also been revised up from JPY 200 billion to JPY 250 billion. Therefore, the total shareholder return comprised of the basic return and gains on strategic share divestitures is expected to be approximately JPY 250 billion, JPY 26 billion higher compared to the initial forecast. I will elaborate on these 3 key points on the following pages.

Please turn to Page 4. The JPY 78.1 billion year-on-year profit growth was driven by profit increase of JPY 54.7 billion in the domestic P&C business. Compared to last fiscal year with significant hail damage, we had fewer major nat cat in the first half of this year. Improvement in the base profitability of fire insurance, thanks to the rate revision implemented in October 2024 as well as strengthened underwriting also contributed to the profit growth. The profit also grew for the overseas business by JPY 20.7 billion. Similar to the domestic environment, fewer natural disasters and increased investment income driven by growth in assets under management contributed to this profit growth.

On Page 5, let me explain the upward revision of FY '25 full year forecast. Full year adjusted consolidated profit for FY '25 has been revised up by JPY 77 billion to JPY 440 billion from the initial forecast. On a year-on-year basis, it is to be a significant profit increase by JPY 116.3 billion, renewing record high both on a consolidated basis and for all business segments. Based on first half results, second half forecast has been revisited with a certain level of conservatism.

On Page 6, I'll explain shareholders' return. As to interim shareholder return for FY '25, dividend per share is JPY 75 as initially forecasted, totaling JPY 68.5 billion. Share buyback with basic return and sales gains on strategically held shares combined amounts to JPY 77 billion. Full year shareholder return forecast for FY '25 is expected to be JPY 250 billion, up JPY 26 billion against the initial forecast, driven by increase in adjusted profit and increased reduction of strategic shareholdings.

Lastly, some supplementary explanation on domestic P&C and overseas insurance. Please look at Page 7. First, let me explain domestic fire insurance. Fire insurance, even without favorable nat cat experience, it's showing strong improvement driven by rate increases and enhanced underwriting. Loss ratio of fire insurance for FY '25 full year without nat cat impact is expected to improve to 32% by 4.3 points year-on-year and by 2.4 points against initial forecast. Impact from last year's rate revision and underwriting enhancement is expected to continue and the positive profit is becoming well established.

Meanwhile, motor insurance excluding nat cat impact remains in a different situation. Given the first half results, the assumption for the second half had been revisited and reflected in forecast. As traffic volume increased, rate of accident frequency in the first half FY '25 was up 0.6% year-on-year against the initial forecast of down 1%. Accordingly, full year forecast has been revised up to the level of the first half results.

Unit repair cost in first half FY '25 was up 7% year-on-year, mainly driven by price hike of auto and its parts due to higher performance as well as inflation. Accordingly, full year forecast has been revised up to the level of first results. In January, auto insurance rates will be revised up by 7.5% on average. This revision has factored in higher-than-expected rate of accident frequency and unit cost, meaning midterm, our outlook for profitability improvement remains intact.

Lastly, supplementary comment on overseas business. Currently, rate environment is becoming softer, but insurance revenue increased in all segments, namely commercial reinsurance and consumer, driven by geographic expansion and other growth strategies. Combined ratio is expected to be on a favorable level with certain level of prudence included.

With that, I end my presentation. Long-term management strategies, including progress on MTMP will be explained at the IR meeting scheduled on November 25. Thank you for listening.

So the first question is from Mr. Muraki of SMBC Nikko.

This is Muraki from SMBC Nikko. My first question is on Page 5. So you show the breakdown of the upward revision that you made. And on the right-hand side, you see the factors. Of these, what are not one-off? And what will still prevail as you plan for next fiscal year?

Thank you for the question, Mr. Muraki. So regarding your question around the factors driving the upward revision for this fiscal year, which will remain for next fiscal year? So first, with the domestic P&C business, compared to the initial plan, the upward revision was JPY 59 billion. As you can see on Page 5, lower natural catastrophe and larger loss experiences are going to be absent next fiscal year. So it will be adjusted to the normal year level.

And for the higher investment gains at the outset of the year, we normally make conservative projections for the net investment income. So in that sense, most of this factor would also be taken out for next fiscal year. On the other hand, for the improved profitability for fire and casualty lines, as Mr. Hamada explained earlier, the improvement was driven by rate revisions and also stronger underwriting capabilities. So these positive factors would remain next fiscal year.

And also, it is not indicated on the slide, but for the auto loss ratio, recently, it has been deteriorating. And compared to the initial plan, we expect the downward pressure to be JPY 3 billion on an after-tax basis. But as Mr. Hamada explained earlier, in January of 2026, we plan to execute rate revisions. And also with the following rate revisions, we aim to offset this negative impact. So the deteriorating loss on the auto policies will be absent next fiscal year.

And moving on to the overseas insurance business. This fiscal year, we revised up the forecast by JPY 20 billion from the initial plan due to multiple factors. But most of this will not be remaining for next fiscal year. Specifically, this fiscal year, we are also benefiting from lower natural catastrophe overseas, and this will normalize for next fiscal year in our projection. On the other hand, the upside on the net investment income is stemming from the growth of the asset under management. So the positive impact on the investment side will remain.

And for the insurance business, other than the nat cat risk, the change in the portfolio mix is impacting the profitability. And assuming that this portfolio mix will be similar to that of this year, this impact would also remain. So as a result, for the overseas business, the upside for this fiscal year will mostly be absent, and we expect to see growth without the one-off upside we saw this year.

My second question is in a follow-up to my first one. So regarding achieving the ROE target for next fiscal year, can you update me on the necessity of adjusting the capital? Looking at Page 16, you have 10 points impact by the sales of the stocks sold by Sompo Holdings. And I assume that you have sold a lot of the Palantir shares. ESR is going up, but the base profitability is improving, and you would also get profit contribution from Aspen. So should you be able to still achieve that 13% ROE target without the capital adjustment? Or do you need to make that adjustment?

Yes. Thank you for the question. So this is Hamada, and I will be responding to that question. On Page 19, we show the full year ROE target for FY '25, which is a first line on the table. Initially, we were expecting 10% ROE for the end of this fiscal year, but it has been revised up to 11.5%. But as we explained, there are many one-offs, primarily the nat cat impact. So when normalizing this, this 11.5% will be pushed down by a little over 1 percentage point.

Also on a normalized level, the ROE for this fiscal year will be a little over 10%. And then we will have the Aspen impact and also improvement of the profitability. And with that, we can expect the ROE to be boosted by roughly 2%, but we will still be short of the 13% target. So beyond what I have explained, we are still considering this. So these are not fixed. But we have a few options. We can keep the current 13% target.

And if it seems not doable, we may decide to adjust the denominator. Or as you said, this year, we have been actively selling our Palantir shares. And this is because the Palantir market cap increased significantly. And by selling our ownership, we saw some inflation of the denominator, which we were not expecting at the beginning of the year. So that has a negative impact of 1% on the ROE. So we can set the target for ROE, excluding this factor. So that will be a feasible option to consider. So leading up to the end of the fiscal year, we will discuss this matter in the management meeting. But having said all that, we cannot say that we do not need capital adjustment. We may need that or we may not need it. We cannot be too optimistic about the outlook. So we will continue to strive to build up both the denominator and the numerator.

Next question is from Tsujino-san of Bank of America Securities.

So this time, you have revised the domestic business. As to fire insurance, profitability has been improved, while auto insurance is worsening. But fire has been performing well. So as Page 7 shows, well, this is the comparison with the previous year. On a full year basis, I don't expect that the comparison between first half basis, any case, the fire is getting better, auto is worsening. So I think that the similar trend that might be in the first half as well.

My question is, to what extent auto has been worsened, maybe JPY 3.5 billion, as you mentioned earlier, and the improved profitability of fire insurance, that would have some impact in the next fiscal year. And in addition, auto insurance is going to be better -- should be better next year. Could you please give some color on that?

Tsujino-san, thank you for the questions. First, about auto insurance, as you have pointed out correctly, increases in unit repair cost or in rate of accident frequency, some elements are behind the initial forecast. For the first half of the year compared to the previous year actuals, auto insurance losses have been aggravated by about JPY 2 billion after-tax basis. Given such situation on a full year basis, the worsening of about JPY 3 billion against initial forecast is expected.

Meanwhile, as to auto insurance, in January next year, we are going to revise the rates and the rate increases will have full year impact for FY 2026. So while factoring in the shortfall against the initial forecast, we would like to make good catch-up so that we are going to achieve the earnings level expected for auto insurance in FY '26.

With respect to fire insurance, its base profitability has been improving at every maturity. As a result of rate increases and other underwriting enhancement measures, we have been accumulating those efforts, and we are seeing good results this year. As you know, fire policy periods range from 1 year to 5 years. At every maturity, we will continue to improve our profitability. And we would like to make it sure that we are going to see good impact next year and beyond.

So my next question is, you have revised down the large losses. But without it, to what extent the business -- fire business has been improved. Large losses this time for this fiscal year, on a pretax basis, we assumed JPY 30 billion at the beginning of the year. Given the results of the first half, we changed it to JPY 26 billion. So after-tax basis, it's about JPY 3 billion add-on on the results. But as to this add-on, for example, as Page 5 shows, it will be included in the very first one, nat cat and large losses experience. And other than that, we have other elements such as the fire insurance, casualty, improved profitability and that impact will be felt next fiscal year.

So next is Mr. Watanabe from Daiwa Securities.

Yes. This is Watanabe from Daiwa Securities. I have 2 questions. My first question is your thoughts about the sales of the Palantir stocks. Hamada-san, you have always said that you would like to use the proceeds of the Palantir share sales for M&A. So have you sold the Palantir shares this time to fund for the Aspen M&A? Or is it because the share price has gone up and the risk has also gone up? So that's why you decided to sell your stake in Palantir?

Yes. Thank you for that question. My answer will be both. The share price has been rising significantly. And we are managing the exposure by setting an upper limit vis-a-vis our net asset value, and we have the opportunity. So we thought this was a golden opportunity. And we sold roughly 50% of what we owned.

I see. My second question is regarding dividend policy. In the Aspen M&A conference, you mentioned that the level of DPS may go up. But this time, you have not changed the dividend outlook. So if we were to raise the DPS, is it going to be happening from next fiscal year?

Yes, like you said, we have not yet closed the Aspen deal, and we don't know the timing for that exactly. And we expect the profit contribution to be happening mainly from FY '26. So that's when we would like to raise the EPS. But other than that, we did revise up our outlook. So we discussed about the dividend. And basically, as we have been explaining, we basically do not want to lower the dividend and would like to raise it, reflecting our fundamental earnings capability. But this time, the upside mainly came from more moderate nat cat. So we decided not to change the dividend, and we would like to consider hiking the dividend next fiscal year.

Next question is from Sato-san of JPMorgan Securities.

My first question is about Palantir and its size. So according to earnings report and looking at consolidated statement of changes in equity, I understand that you have transferred JPY 250 billion from investment in equity instruments to retained earnings. And you have about after-tax sales gains of JPY 90 billion from the selling of strategically held shares. That means about JPY 150 billion, the post-tax capital gains by selling Palantir shares.

And earlier, you talked about the possibility of reusing those gains for Aspen. And as you explained at the time of the Aspen acquisition, there was some -- the investment profit loss in the funding, and you assumed about JPY 15 billion. Is there any expectation that this -- the loss can be alleviated or be less?

Thank you for the question. And I cannot talk about details about any individual shares, but it seems that you have read correctly. And you're right about the first -- second half of your comments. When we were considering to acquire Aspen, of course, we did not think about how much we should use the capital gains from Palantir shares for the acquisition and so on. So we just set the rough percentage of the acquisition amount. And so based on that, I would say that the investment profit loss actually will be less than expected.

My second question is about domestic fire insurance and its improved profitability, especially when you look at expense ratio, in your plan, you originally assumed about 30% for fire insurance, if I remember correctly. But now I think it has been reduced, looking at Page 28. So original 30% expense ratio is now at 28.3%. And on an absolute amount basis, it has come down to some extent. So what kind of initiatives are involved there?

Sato-san, thank you for the question. The expense ratio of fire insurance, well, initially, at the beginning of the year, we assumed about agent commission, and we were rather on the conservative side in assuming the commission level. But given the actuals, given the current status, what things are in a very favorable status and we have made revision.

I think it was part of your strategy to revisit the relationship with your agents. It's not that it is behind this revision. It's not emerging yet in this fiscal year. Am I right? Well, in that sense, I would say that the agent commission included, we are now working on the overall relationship with agents. And part of it is included in here as well.

Next, Mr. Takemura from Morgan Stanley MUFG.

Yes. This is Takemura from Morgan Stanley MUFG. I have one question, which is about how you think about ESR. So I am looking at Page 16 on the presentation. And you have indicated the impact of the Aspen deal, which is pushing down the ESR by roughly 30 percentage points, and you stand at 250.6%. So without the Aspen deal, it would have stood at 280% approximately.

And moving on to the next slide on Page 17, you show that you have JPY 5 trillion of adjusted capital and risk amount of JPY 1.7 trillion. So the simple math keeps me 294%. And there's a difference of roughly 14 percentage points. So other than the Aspen deal, are there any factors that will be impacting the ESR?

Yes. Thank you, Mr. Takemura. So regarding how we think about ESR, as we indicate on Page 17, and as you pointed out, we showed the adjusted capital and the risk amount. But this is a rough calculation, and we round down the numbers. So there is some gap between the simple calculation and the actual ESR, and that is the primary reason for that deviation.

Also, you have sold some of the shares in Palantir. And even with that, the ESR will be in excess of 250%. In managing ESR, I'm sure that you are looking inorganic opportunities, including the one for the domestic well-being business. So a certain level of excess over 250% is going to be something that you will tolerate. So should we expect the ESR to be in excess of 250% to a certain extent?

Yes, this is Hamada speaking. As we set the upper limit, we recognize that our ESR is in excess of that upper limit. And the reason we set the upper limit is because we want to achieve and manage the ROE. So we look at how is the ROE level and also how we strike balance between investment and shareholder return. So with that in mind, we deal with the capital that is in excess of the upper limit.

Next question is from Sakamaki-san of Mizuho Securities.

Here is Sakamaki, Mizuho Securities. I have 2 questions, one for domestic business, another for overseas business. Starting with domestic business. I'd like to ask about combined ratio of auto insurance. Like fire insurance, expenses are lower than your initial forecast. Initially, you also assumed increase in systems investment expenses. So rate revision, agent commission and systems investment, all included. Could you please talk about profitability of auto insurance business? And if there's any time lag of booking for systems investment, could you please talk about that, too? That's my first question.

Sakamaki-san, thank you for the question. As to expense ratio of auto insurance, here, the factors involved are more or less the same as factors for fire, namely the agent commission ratio, the contribution is significant there. And as to systems investment and other nonpersonnel costs and any potential time lag, well, things are moving on in line with the plan and the size or the amount involved remains unchanged from the initial forecast.

My second question is about overseas business. I would like to know more about the actual real performance. As to combined ratio assumption without discount, initially, it stood at 95%. It is now 94.9%. So the difference is only 0.1%. But the nat cat, the impact was revised down by $200 million. So maybe there are other factors which were actually worse than initial factors?

So combined ratio without the discount, as we touched upon earlier, this fiscal year, the rate level and the contract terms, we are looking at those elements, and we are making a shift in our portfolio mix to casualty line. As to casualty line, for example, compared to property line, volatility is very low, while the expected loss ratio is a bit high. As a result, when combined ratio without the discount impact is in line with the initial forecast. The major reason there is the changes in the portfolio mix. So going forward, base loss ratio might go up, but the volatility will be less going forward. So compared to initial forecast, more changes in the portfolio mix.

Sakamaki. So next, Mr. Sasaki from Nomura Securities.

Yes. This is Sasaki from Nomura Securities. I would like to ask 2 questions. First, on the improvement of the profitability for the domestic fire business. Is the magnitude of the profitability improvement going to get larger next year?

My second question is regarding Page 56 of the presentation deck. You mentioned that for the overseas insurance business, the combined ratio compared to what you presented from the FY '24 results, the combined ratio projection seems to have been raised. Is it because the business is deteriorating from the original plan? Or is it because of the change of the portfolio mix that you explained earlier? Or is it both? And also, generally speaking, listening to the global insurance companies, they talk about the impact of the softening market. So looking at the Q3 and beyond and also for next fiscal year, what is your outlook for the overseas underwriting profit?

Yes. Mr. Sasaki, thank you for those questions. First, regarding the improvement on the profitability of the domestic fire business, and is it going to be sustainable? As we explained earlier, as the policies are rolled over, we will see improvement in the profitability. So basically, this benefit will continue to be observed next fiscal year.

But of course, the policies needing such improvement within our total portfolio will get smaller in terms of the proportion. So in that sense, if we look at the improvement year-over-year, the magnitude would be more moderate.

And regarding your second question on the overseas combined ratio, like you mentioned, this is mainly because of -- due to the change in the portfolio mix and the impact is bigger than initially expected.

I have a follow-up question. So now looking at the same risk base or risk amount, do you see any lines of business where you see a big downward pressure on the rate? Or do you not have much visibility?

Your question is around the overseas premium rate. Is that correct?

Yes, that is correct.

Yes, I will take that question. It varies quite significantly depending on the line of businesses. As you know, for the property policies, we see softening of the market. On the other hand, for the casualty products, especially for the excess layer products, we continue to see relatively high rate. Also, we still see some hardening of the market. Also, we will underwrite in a selective manner to build a profitable portfolio. So that is what we have been explaining as a change in the product mix.

Next question is from Majima-san, Tokai Tokyo Intelligence Lab.

I also want to ask about fire insurance. So-called 2025 problem has arrived. It used to be like 30-year maturity, now more and more policies renew every 10 years or so. So from September '25 through September '26, during that 1 year, I think there will be more renewals than normal level. But that impact has not been factored in yet? That's my first question.

The second question is about fire insurance premium. It seems that the premium is increasing faster from the first quarter to the second quarter this year. Is it because of some large policies? Or is it the phenomenon observed every year from first quarter to second quarter pace up in increase in premium?

Majima-san, thank you for the question. As to your first question, fire insurance loss ratio and the impact of massive renewals coming up, if it is factored in or not. As to fire insurance loss ratio, as you know, denominator is insurance revenue or earned premium. And so -- as to massive renewals, basically, on a written basis, the renewals are expected to increase during this 1 year that you mentioned, but it would not give big impact on base loss ratio.

As to your second question, fire insurance and its premium, you said that maybe there's some acceleration of the pace in the second quarter. Well, that is actually a phenomenon, which is unique for IFRS. In the first quarter, the insurance, the revenue was booked on the smaller side than the larger side. And in July to September period, usually partly because of nat cat, the fire insurance losses tend to be larger. So in the second quarter at IFRS because of this seasonality, insurance revenue tends to be booked larger. So it's not that there's some special factor or some unexpected against the plan happened.

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

This is Okumura speaking. Hello, everyone. Thank you very much for joining this IR session, although it was a short notice.

I would like to provide explanation on the acquisition of Aspen Insurance Holdings. Please turn to Page 3. This is the executive summary including things on here and not only here, I would like to explain our purpose is for a future of health, well-being and financial protection, all of this strategy is to realize this purpose.

The external environment is rapidly changing and in order to achieve the purpose, enhancement of the resilience is extremely important. And also in order to fully leverage the capabilities of the group, we are to proceed with the capital recycling management and Sompo and well-being 2 Business Group has been established in April for that purpose.

Since we acquired Endurance, it's been 8 years. And during that time, Sompo International have built a soft power. Market intelligence, talent and market network, these are powers that have been contributing to enhance the capability to pursue deals and execute and follow through on the deal.

And during the 8 years, the governance of the overseas business have been strengthened and through them, we would like to certainly proceed with PMI. The positive impact to Sompo Group includes enhancement of the top line or ROE or EPS.

As a result, EPS growth will likely to accelerate. This future growth story the adjusted profit target of JPY 500 billion and market cap of JPY 6 trillion, those are targets, and this is an important first step to achieve them.

The impact in the midterm plan period is that the likelihood of achieving the targets will be improved. The point of highlight of the acquisition, the details will be covered by but the important point this time is that this time, JPY 520 billion or $3.48 billion will be the acquisition amount and the top line and bottom line will expand. And in the global presence will be strengthened.

In the reinsurance area, we will join the top 10, and we can realize market and also capital-light side car mobile using can be acquired. And also above all product and cost synergy impact can be expected. Those are the highlights of the acquisition.

Please turn to Page 5. Here, the history of the Sompo Group's growth is shown. This shows the transition of adjusted consolidated profit of the group in 2030 beyond the current midterm plan, JPY 500 billion of adjusted consolidated profit and market cap of JPY 6 trillion is the target.

After the closing of this deal, more than JPY 45 billion of buildup of profit is expected. And in the future, we will be conscious of the global peer to achieve the scope -- expansion of the business scope, enhancement resilience and ROE DPS growth further.

Please turn to Page 6. This is the impact to the group medium-term plan. We are targeting the EPS growth and ROE growth. For EPS growth, the target has been CAGR of 12% or higher, but we have now a CAGR of 18% in sight and ROE, 1 point improvement of ROE through this acquisition is expected. So we would like to proceed strongly to the target of 13% to 15% ROE target.

Please turn to Page 7. This focuses on the growth history of the examples overseas business. Overseas business from around 2010, we have started to proactively expand overseas business. In 2017, we acquired Endurance, and that has the making event.

And for top line, 19% growth were done by year and for the bottom, the adjusted profit was about 8% growth. And we have been focusing on stable portfolio. So we have been able to do both the growth and the stable profit.

Please turn to Page 8. And for this portion, this is about qualitative matters. As was mentioned earlier, group as a whole, after acquisition of Endurance, we have reviewed the governance of the group as a whole and strengthen it group as a whole the transaction.

And in order to do the M&As, we have strengthened EPA and various standards. And also not just figures and numbers, but we have strengthened talent awareness as well as the market positioning. So in 8 years' time, we've been able to strengthen those. And Group as a whole disciplined management and activity have been focused from a stable asset. We have shifted to high growth, high profitable assets by selling the equity -- strategic equity holdings, et cetera.

And those with risk appetite. For example, the Brazilian consumer assets, we have exited from that market. In M&A, we had in and out, meaning exits. We have had the discipline to work these progresses and optimum allocation of our assets for the group and building up effect, not just for sample P&C, but for simple wellbeings, we have been able to do such matters.

And the last page for myself, please turn to Page 9. This is shareholder return. In current MTP, basic way of thinking of shareholder return, the philosophy has not changed. In one word, we will do whatever we've mentioned that is the stance. But through this deal this time, EPS growth and DPS growth will probably accelerate.

So the -- with the profit growth, we will be able to strengthen shareholder return, and we will be able to realize that. As for the capital efficiency, ROE, management thinks that this is a very important indicator. And with this deal, ESR, for a certain period of time, will reduce by around 30 points. But with the profit accumulation and selling of the risk assets, we will be able to improve the ESR.

So continuously, for M&A opportunity, we would like to seek for further opportunities. So that was the overview from myself. And from here, we would like to go more in detail about the acquisition itself and the deal. So I would like to hand the baton to Jim and Nick. So Jim, please.

[indiscernible] and good afternoon, everybody. I am joined by Nicolas Burnet, who is Deputy CFO of Sompo Holdings Group and CFO of Sompo International. He will speak after to go through some of the financials of this specifics of the deal.

So I'm very excited to speak with you today about the announcement that was made yesterday. Consistent with our strategy to expand our business outside of Japan, we have very pleased to announce the acquisition, the planned acquisition of Aspen Insurance Holdings, which we expect to close sometime in the first half of 2026.

We find this business to be very both complementary and expands our product services and geographical footprint. It gives us an opportunity to reenter the Lloyd's market with a market-leading syndicate and a performance that has justified its ranking within Lloyd's.

It gives us access to over 80 other markets. And in many other presentations, I've talked about countries that we -- end markets that we have yet to enter. And so this gives us the opportunity to accelerate the entrance into those markets on a selective basis. And Nick will talk more about Capital Markets.

And it will also double our top line business in the insurance portfolios of the United States, the United Kingdom and as well as our reinsurance portfolio globally. It brings our group -- Sompo International Group GWP to over $20 billion annually. We were attracted by the strong underwriting culture of Aspen, which mirrors that of Sompo International, and we find it very complementary.

The 1,100 employees of Aspen are currently located approximately just over half in the U.K., the United States and then approximately 70 people in Bermuda and other parts of the world, some small representation. We're very excited about the next steps and the opportunities that this will bring not only to Sompo International but to Sampo Group, but also to all of the stakeholders, our customers, the employees and the opportunity that that's going to bring.

So at this point, to go over some of the specifics and the numbers of the deal, I will turn it over to Nicolas Burnet. Thank you.

Thank you, Jim. And as Jim said, we're extremely excited about the transaction and Aspen's strategic fit with Sampo.

We purchased Aspen on financially attractive terms and conditions. And furthermore, we expect when integrated into our platform we will be able to unlock substantial value. As Okamura-san said, we paid approximately $3.48 billion for 100% of the common shares or $37.50 per fully diluted shares.

The $3.48 billion does not include each series of preference shares of Aspen. These preference shares will remain outstanding post the transaction. This purchase price equates to 1.32x tangible book value and is less than 8x for earnings.

Additionally, we received written consent from affiliates of Apollo Global Management for the approval of the transaction. And as Jim said, we anticipate closing in the first half of 2026.

If we go to the next slide, Slide 12. This transaction further confirms Sompo status as a global P&C insurer and reinsurer. This transaction makes us a top 10 global reinsurer provides us with a complementary insurance business and provides us access to a well-diversified top-tier Lloyd's operation.

And excitingly, it provides Tampa with a multi-platform underwriting model through Aspen Capital Markets, which will allow us to leverage third-party capital while providing balance sheet flexibility. As Okamura-san said, this is financially attractive for us, and we expect to be immediately accretive to ROE. The capital should benefit from the potential ratings uplift to Sompo's A+ rating and the comparable business model should allow us to achieve significant operating synergies Aspen's loss portfolio transfer provides additional balance sheet support to Aspen.

And finally, both Sompo International and our parent will remain well capitalized even after the transaction which provides us with the financial flexibility to continue to drive our growth strategy.

If we go to the next slide, Slide 13. We have shared with you at prior meetings, our strategic vision and our growth strategy outlined on the left side of this slide, and we believe this transaction closely aligns to our vision. The transaction supports our growth strategy and provides us with a platform that generated $4.6 billion of GWP in 2024.

But also, the Aspen Capital Markets platform allows us to generate fee-based income, which is capital-light and reduces earnings volatility. We have contemplated a third-party capital platform, and this provides us with one of the best platforms, which originated in 2013. The transaction increases our relevance and supports our growth strategy accelerating our growth initiatives in 2 of our targeted markets, North America and growth in the domestic U.K. market.

This also allows us to access untapped markets through Aspen's top-tier Lloyd platform, while further simplifying streamlining capital deployment and driving additional vertical integration and operating leverage while implementing synergy opportunities.

Finally, this provides us with a broader global offering to meet our brokers' and clients' needs.

If we go to the next slide. Aspen has a diverse product offering by geography and product lines, as shown on the right-hand side of the slide. After the acquisition of Aspen in 2019, the management has done a great job to turn the business to its current state.

Aspen has exited unprofitable lines of business. It has reduced cat exposure as evidence through its net probable loss calculation as a percentage of shareholders' equity. It is implemented an adverse development cover, which was later converted into a loss portfolio transfer, all which led to demonstrable profitability improvement while reducing volatility, as evidenced for its combined ratio, which improved by almost 20 points since 2019.

If we go to the next slide. This slide simply shows that both the insurance and reinsurance platforms are well balanced and diversified by product offerings and support it by the Aspen Capital Markets business.

And if we go to the next slide, Slide 16. The pro forma organization increases our top line by 28%, reflected in 2024 pro forma results of over $21 billion of gross written premiums and increases our pro forma operating income by 29%.

On the right-hand side, you can see by geography, how it has enhanced our profile in each of our existing geographies. But equally as important, and as Jim stated, is that it provides us with access through Lloyd's to 80-plus insurance markets and over 200 reinsurance market and presents the opportunity to enhance Sompo in areas that we are currently underserved.

If you go to the next slide. If you evaluate the transaction through the lens of our commercial insurance and reinsurance segment, this further supports the strategic elements of the transaction. The transaction increases our insurance premiums by 20% including by 27% in North America and 12% in the U.K., 2 key strategic growth markets for Sompo.

It provides Sompo with complementary portfolio and broader access to specialty lines of business. And when you shift to our reinsurance business, and as you can see on the right-hand side of the chart, this makes the pro forma company a top 10 global reinsurance company. It increases our top line by 40%, enhances our underwriting capabilities while still being able to maintain our nibble strategy that aligns with our proven track record.

If you go to the next slide, Slide 18. Aspen Capital Markets provides us as one of the leading third-party capital platforms in the industry. It has been an integral part of Aspen since 2013 with an impressive management team. It will provide Sompo with capital flexibility while providing Aspen Capital market investors with access to broader reinsurance and insurance opportunities.

It is also a well-diversified product offering, which is not just focused on property cat lines of business. As you can see on the right-hand side of the business, ACM has grown assets under management by over $1 billion since 2019 and now provides Aspen with a significant amount of fee-based income which reduces the overall volatility of the earnings stream and will be attractive to our capital base.

If you go to the next slide, Slide 19. This -- as I stated before, this transaction is financially attractive and delivers ROE accretion, and we expect to achieve over $200 million of run rate cost savings by 2030. This transaction allows us to grow capital-light fee-based income from Aspen Capital Markets, which reduces earnings volatility, enhances balance sheet flexibility.

And finally, Sompo is well positioned after the transaction as we maintain a strong capital base and financial flexibility to execute our enterprise strategy.

And then on the last slide. The investments we are making position us to grow over time, leading to returns on capital. This is evidence of our deliberate and disciplined execution as we continue to drive our growth strategy and achieve our key financial objectives.

I'm going to stop it there, and I'll turn it over for questions.

We will now take questions from the floor. First, Ms. Tsujino of BofA Securities.

I have 2 questions. First is on specialty. Aspen is operating in a domain similar to Sompo International. Of course, they have customers segment-wise, the risk profile may be very different, but will there be a skew of risk in particular -- concentration of risk in a particular area?

When you look at the details, there may be some casualty risk that SI does not want to acquire. So I think there are businesses that you need to reduce and then you need to acquire new businesses to compensate for that. How big of the burden will that likely be? That is my first question.

Another question. This is question to Mr. Okumura, not related to Aspen's business. This time, through this acquisition, the ESR will go down by 30 points, but we will sell Japan equities -- and sorry, you sell the Japanese equities cross shareholdings and also you have some room to sell one particular U.S. equity further.

When you sell that particular equity, you will generate a significant profit through that sales. And in the past case of selling such an equity holdings, then it was not in combination with a particular acquisition. So cash was generated and risk is reduced and then it was allocated to the additional shareholder return. But this time, I feel that the situation is different. So can you explain the thinking?

Ms. Tsujino, thank you for your question. You raised 2 questions. For the first question, I would like Jim-san and Nic-san to reply. I think it's mostly to do with PMI. Generally speaking, the overlap of the business and on risks through PMI, we will analyze. And internally, through various analysis not everything will be published, and it's not a simple addition through the PMI. We will look at the risk profile in detail. So whatever that meets our risk profile, we will manage accordingly. So on the first question, I would like to ask JI'm-san to add some comments. Over to you, Jim-san.

Thank you, Okumura-san. Through the due diligence process and looking through their portfolio, we do find it, as I mentioned, both complementary in terms of, as you are correct, it is in the same space, but more of what we like to write, but also gives us access to portfolios where particularly through their London Lloyd's platform gets us into different specialty spaces.

But we feel that both their capital management, their reinsurance structure, combined with ours, leaves us room to continue to write and to retain that business. As we go through and we look at customers over the next couple of months, there may be some opportunities to change in 2026 and beyond. But right now, we're very comfortable that the business is complementary.

Nic, is there anything you'd add to that?

Yes, because, Jim, thanks to that, I would add 1 more point. When you look at the Aspen Capital Markets on Slide 15 in the middle of that. You can see that that's also a well-diversified portfolio. We're over 80% is outside of the cat business. So that is an area where they were their lines of business into ACM. And with that as background, I think it helps diversify the portfolio.

Thank you very much. ESR temporarily will decline by 30 points, that's what we have presented. On the other hand, until 2030 in the long term, we will reduce to 0 the cross shareholdings. And through that, we will reallocate the capital to areas where the contribution to the enhancement of enterprise value is expected.

And also at 50% of the adjusted profit and also 50% of the sale of the cross shareholding that shareholder return policy is unchanged. The deal this time and the low capital efficiency asset exit. That process is continuous. So our shareholder return policy is unchanged. As I have said, basically, in the medium to long term, we will aim at enhancing the enterprise value and through profit increase, we will expand and strengthen the return and there is no change to that policy at all.

Thank you very much, Tsujino-san. Next is Watanabe-san from Daiwa Securities, please.

Yes. This is Watanabe from Daiwa Securities. I have 2 questions. One is on Page 5. Whether the accuracy of the effect of this, you mentioned, USD 4.6 billion of the effect. So can I -- USD 45 billion of effect. We would like to know about this. And it says here a $200 million cost reduction, how are you going to identify this? I want to know more in detail about this.

Second is about -- this is about right after the IPO. So I would like to know the background why you did this right after the IPO?

Thank you very much, Watanabe-san. The first question about the figures and numbers, Nick, I think, and Jim will complement my comment. But I would like to talk about the market cycle that you have mentioned and inflation in our business plan. When analyzing our business plan, we have incorporated in some extent. And based on that, making it conservative, and we see it as JPY 45 billion. JPY 45 billion seems to be conservative, but we think that there will be Aspen effect over JPY 45 billion and USD 200 million of synergy.

There are some overlap, and we can reduce the costs from that. And by strengthening and having new lines of business, we will see new lines, new revenue, but until 2030, we will have over USD 200 million of cost reduction effect.

And -- but the background, we cannot go into detail at the IR meetings I've been explaining to you that Japanese business environment has been drastically changing, and we are selling the cross shareholdings and this is changing existing business model and the shrinking Japanese market to growing market, we have to develop our market our business.

And in addition to insurance, we have to expand the business in well-being area as well. In such an environment, M&A opportunity within and without Japan, we had a long list of opportunities. And naturally, in that, we had this company's name as well. As mentioned earlier, I have market intelligence, and market network and leveraging on that with the best timing, we were able to talk with Aspen and agree upon this deal. This is the background.

The first and second, I think no questions, any complementary comment from Nick and Jim? Jim, please?

Thank you, Okumura-san. I think Nick will comment a little bit on some of those aspects that you touched upon. But I think as Okamura-san said, we're not going into any great detail today about where we see the savings, but some of the obvious things in terms of company auditors, we don't need 2, we need one in some of the functional areas, we'll look to see how we can have synergies across that. But Nick, in terms of the the numbers that we've presented and the timing, over to you.

Yes. So I mean, Jim, just maybe I'll talk about the buckets of where we expect to get the synergies. So as you stated, we expect to get $200 million of run rate synergies by 2030. This is approximately 35% of the target, but it's less than 10% of the pro forma. The synergies will come from several areas, systems integration, Jim, as you talked about; operating leverage, to meet the needs of our increased scale and that's the scale of Sompo International Holdings, which is already growing and continues to grow; getting operational efficiencies and overlapping of functional support. So the combination of all of those as we look at it and as we start to think about integration are the areas that we'll be targeting for these synergies.

Did this suffice your question?

Yes.

Moving on to JPMorgan Securities. Sato-san, please unmute and ask your question.

I'm Sato of JPMorgan Securities. I have 2 questions. First question is adjusted consolidated ROE. This time, you say that you expect an increase of 1%. On the other hand, the overseas equity sale, if you generate the profit in large scale, then the adjusted net asset will be expanded for the adjusted consolidation.

Considering that point with this acquisition, 13% to 15% target of the midterm plan, the likelihood of achieving this, has it been improved significantly? So that's 1 point. The second point, the Aspen business growth potential, the financial line is -- the softening of the market is already confirmed in this financial line.

And also Lloyd's business that you have exited in the past considering the profitability of the Lloyd's business, what could be the priority and order of priority? In terms of the business or lines of business, do you have any priority?

Sato-san, thank you for your question. There were 2 questions. The probability of achieving the adjusted ROE target and another is the current and the future expectation of Aspen's business given the market cycle and inflation, what are the priorities?

The second point your second question, I would like Jim-san and Nic-san to answer. On the first point on ROE. As you say, this transaction will lead to ROE accretion, and we do expect that to happen for a certain extent. On the other hand, depending on other conditions, net asset may increase and ESR may recover. So I'm not optimistic yet. So ROE 13% to 15% in order to further raise the probability of achieving this risk-taking and further M&A considered. This transaction is not the end of the initiatives.

On the other hand, discipline needs to be maintained, that I feel strongly. So in an appropriate manner, I would like to consider the return -- shareholder return. On ROE, Hamada-san, the Group CFO, will add some more comments and then move on to the second question. Hamada-san, please.

This is Hamada speaking. On ROE, Sato-san is exactly right, the policy shareholdings and also other shares when we sell, then based on the calculation of ROE, the denominator will increase. So we are reviewing from various aspects.

Right now, the -- once the Aspen's acquisition is successful and ROE as of the end of FY '26 will not reach 13% yet according to various calculation. On the other hand, the ESR at that time will be far higher than 250%. So in other words, further gross investments will be done. And if that cannot be achieved, we will continue to return to the shareholders.

We can say that the likelihood of achieving the goal is improved, but we're not saying that we have covered all the possibilities.

So the second point, not just Aspen, but our view of the business environment, particularly rates cycle how do you view and Lloyd's market, what is our view? I would like Jim-san and Nic-san to comment. Over to you, Jim-san.

Thank you, Okamura-san. I think the comment was in terms of the combination of certain lines of businesses that had certain -- where we are well aware that market rates are declining. And so what I think of FinPro? FinPro consists of many lines of business. It's not simply D&O. It consists of D&O, it consists of E&O, it consists of prime, it consists of transactional liability, cyber.

So we are very confident. And when you look across the various segments in terms of large multinational publicly traded versus privately held, not-for-profit business and so we feel that the diversification of that portfolio across the multiple products plus the different segmentation ensures that we are able to continue to be there our customers and continue to manage and underwrite through that process.

In terms of the question about the Lloyd's business, you can tell that the Aspen portfolio in Lloyd's is one of the top-ranked in terms of performance of all the syndicates within Lloyd's and continue -- and last year performed with a sub-90 combined ratio. So from an underwriting perspective, this is -- we're entering a market where underwriting matters. And given the focus, both within SIH and within Aspen over the last number of years on underwriting, we feel that we will be able to navigate and manage through this cycle.

Nic, anything further?

No. I think as you stated, Jim, we're getting access to a top 20 Lloyd's operation made up by 3 syndicates, which has really had strong operational performance. But I think, Jim, as you stated before, this really gives us the opportunity to address many of the markets where we're underserved and we're really excited about the Lloyd's opportunity also.

So next from Sasaki-san from Nomura Securities.

This is Sasaki from Nomura Securities. I have 2 questions. One, you mentioned about risk appetite to M&A, Mr. Okumura. This deal, I think, maybe you are already satisfied with that or do you think that you need to think for the second and third round of M&As, if you have any idea of that please share with me? That's number one.

Second, numbers and figures, I would like to confirm. As for the shareholder return, the capital adjustment I would like to hear about that if that is an appropriate range of ESR, then you're not going to be doing any capital adjustments. But by the end of this fiscal year or when you think about the shareholder return of this fiscal year, within the appropriate range. And does that mean that you're not going to be doing any capital adjustment. Can you talk about that? Those are 2 of my questions.

Thank you very much. First was about the risk appetite or so to speak, for what we think about the new M&A for overseas market. I think there are many possibilities. But the most important priority for us is that closed this deal this time and do PMI, as we plan, and the Aspen incorporate into the Sompo Group so that they could fit into our culture and our business. That is a priority that we have now.

Having said so, when you look at the capital situation. And of course, we have opportunity to expand for overseas M&A. This is not the end. And Sompo P&C we have established and at the same time, we have made sample well-beings. This is to accelerate connect and be connected.

And what we wanted to do make more positive for 100 years of life. And there are solutions that is not yet been fulfilled. So in the area of well-beings, we are strengthening our structure, and we have a long list there as well. And there, we have a very strong appetite. I would definitely say so. And group as a whole, new businesses, we have to build that toward the future of the safe and financial protection, we would have to do more.

So we would like to take risks for our purposes as well. So for overseas, if we have a certain degree of PMI, we will look for another. And wellbeings, we are definitely looking for new opportunities.

And the second, I think Mr. Hamada would like to also supplement this comment. But ESR is within our target range at this point of time. So we are comfortable now. But that's been discussed in the past. We have assets with low capital efficiencies.

We want to shrink them, and we want to reallocate those capitals into a higher profitability, and we want to accumulate profit. And if we have accumulated profit we will be having capital. And from that perspective, if we are over years range, then we would have to make some adjustments with discipline.

So Hamada-san, any comments from you?

Yes. The target range of ESR is a very important factor for us to think about capital adjustments. But top priority goal is to achieve ROE goal. And based on that, what about the appetite for growth investment and was mentioned by Mr. Okumura. I think that's what he wanted to say. So thinking about those factors and thinking about this as a measure, we would like to think what should be done.

And if you look at Page 9, from end of '24 in 3 months, ESR increased by 9 points. We had sold risk assets and ESR will accelerate its speed. Currently, we are in a comfortable situation, but such a situation may not long last. So as mentioned earlier, still, we have a lot of abundant capital to use.

I have one more question or figures to confirm. On Page 5, you talked about adjusted profit, JPY 500 billion level. The effect of the Aspen is JPY 45 billion and $200 million of cost reduction. Bottom line is JPY 70 billion. So based on that background, the bottom line seems to be declining trend. So that is the reason why you came up with $37.5 per share. Is my understanding correct?

Thank you very much. Well, the price of the acquisition, we have incorporated various factors and as a negotiation, we came up with this. It doesn't necessarily mean that assuming the Aspen's declining business, we did not come up with this, but I think Mr. Hamada would like to comment on this because there are some conservative figures there.

Yes, earlier you mentioned, but what about those things that is not going to fit our risks, but for insurance for FY '26, we are quite conservative. And for loss ratio, Aspen's loss ratio, we have looked them conservatively as well. Nick had checked on that being too conservative maybe in some sense, but very conservative. So with this spend, we will have goodwill and of which PBAs amortization, we have to deduct. And so around JPY 60 billion. And so this is about deduction and JPY 45 billion. The calculation was conservative. So we stated as over JPY 45 billion.

Next Sakamaki-san from Mizuho Securities.

I'm Sakamaki from Mizuho Securities. I have 2 questions. First question is related to Page 3 of your material. The expense ratio and also capital policy synergy, what do you exactly mean by the capital policy synergy? That is my first question.

The second question, this time ACM of Aspen that you acquired by using this the reinsurance strategy of the entire Sompo Holdings, how will that change?

Thank you, Sakamaki-san. Both of these questions, I would like Nic and Jim to add about the synergy of capital policy. After integration of the business, we can expect risk diversification effect and also to a certain extent, we can utilize part capital and we can expand the capital-light fee business fee revenue. So that is what we mean by capital policy synergy.

And also, the expense ratio the overlapping functions will generate cost synergy and system integration and other various synergy effects can be expected. In the future, through integration of SI, how will reinsurance business be and also the seeding be, we will cover these points through PMI in the future. And the current policy on these matters, I would like Jim to reply. Over to you, Jim and Nic on these 2 points.

Thank you, Okumura-san. I think you covered the questions. With respect to the reinsurance. At this point, we have no plans to change our strategy with respect to the sub P&C reinsurance. We've got a proven track record and a process that is working well for the group. By the addition of Aspen Capital Markets, we may be able to diversify some of that -- the capital that's brought in to support our business.

But at this point, we don't anticipate any real changes with respect to the overall strategy with respect to the reinsurance purchasing. Nic, did you have anything to add? Because I think Okumura-san answered those well.

Yes, I think we talked to the expense synergies and the opportunities there and the expectation to support our growing business. I think with the capital synergies also as we stated, it's the diversification benefits we're going to get. It's the benefits of liquidity and capital fundability as we bring the 2 entities together. And we also may benefit from if we get the uplift to Sompo's A+ rating for the whole, that will give another opportunity to achieve additional capital synergies.

So when we look at those opportunities, we think there is an opportunity to bring together the diversification benefits, the capital liquidity, but also the benefit from the potential uplift, the potential uplift to the Sompo A+ rating, which would also provide some other opportunities.

Thank you very much. Some more details. For example, in the Bermuda local regulation-wise, I don't think you have a capital shortage, but overseas business is capital collection will be expected? Will there be any changes?

The collection from overseas business or what I am looking at right now is overseas business profit growth will be higher than domestic business.

So rather than collection phase, our proactive capital allocation is the phase we are in. On the other hand, domestically, SJR is a project that we are progressing. In the future, we will move ahead with system investment, a simplification of the product and process automation, so necessary investments will be made for the domestic to improve the profitability.

As of now, from the profitability perspective, we prioritize overseas business in terms of capital allocation.

Any questions. Takemura-san from Morgan Stanley.

This is Takemura from Morgan Stanley. I have 2 questions. First, about ESR macro sensitivity. Through this deal, any changes? That's my question. Basically, Aspen balance sheet is strong, you mentioned. The current status in your group, you have lower macro sensitivity. But through this deal, is there any changes in the sensitivity towards FX or interest rate? So if you could elaborate on this point? That's number one.

Two, well, this is going to be maybe repetition I want to know the content, the business, what ACM is doing. Could I ask about this. I would like to have deeper understanding on ACM.

Yes, my understanding is that basically you establish fund and there, you have the reinsurance there. And the third-party equity will be accepted there and you have fee income coming from that. And at the same time, you can also contribute to fundings. Maybe that's maybe the business model of ACM. That's my image. Is my understanding correct?

Takemura-san, thank you very much. We received 2 questions. First, after Aspen, any changes in macro sensitivities, interest rate and FX? Mr. Hamada will answer this. And the second one, ACMs, yes, business model. Yes, I think it isn't correct, your understanding. But maybe on ACM, with the sidecar business as far as we can disclose, so maybe Jim or Nic can answer to the second question. So starting from the first one. Hamada-san, please?

Yes, we have not done the detailed balance sheet and others have added. But sensitivity, there will be no big changes. This is not balance sheet. Simply speaking, with this deal within group, we have plus 5% profit weight of overseas business in our group. So maybe a little bit of FX sensitivity higher. But I think there is nothing to worth mention.

So for the second part, ACM business model, Jim, Nic, any comments?

Maybe Jim if I started, if that's okay or?

Yes, go ahead, Nic.

So I think the basic elements, I think you've outlined. They take alternative capital sources. And you can see here that there's assets under management on the slide up on the screen, and they retrocede premiums into those alternative capital into those alternative capital sources.

So it's -- and similar to a traditional reinsurance where they retrocede out, they they also get fee-based income for that for the retroceding note. So I think you have the basic elements. And you can see that the assets under management are growing. So as they continue to get third-party capital, it's called our alternative sources of capital. They can provide with more capital, they can -- you can retrocede more into that and get higher fee-based business, and that fee-based business is relatively stable.

And in that sense, so this is a part of a business you would be expanding or to the ACM utilizing this business, you will be doing more? So can we expect the acceleration of the business growth here for this company?

Yes, with SI integration and the way of thinking about underwriting and of course, appetite on investor side, it depends on that, but we would like to continuously have a capital-light business. So maybe, Nic, can you comment?

Well, I think the opportunity is definitely there to grow this business. We continue to see it as a potential opportunity to give us financial flexibility and to use our balance sheet in different ways, and it's a capital-light business. So the opportunity is definitely there, as I agree with Takemura-san, yes.

So we are close to the ending time. So I would like to take one last question. Sakamaki-san of Mizuho Securities.

This is Sakamaki of Mizuho. My question is related to a very small details. Page 19 on $200 million of integration cost. How will that be handled in terms of the adjusted profit?

The definition of the adjusted profit and how that is calculated, this will be covered by Hamada-san.

We will not include this in the item.

Thank you, Sakamaki-san. It's time to close the session. So with this, we would like to close the meeting. Please feel free to contact our IR office if you have any additional questions. Thank you very much for your participation.