MS&AD Insurance Group Holdings, Inc. (8725) Earnings Call Transcript & Summary

[Interpreted] Thank you for joining us for the fiscal 2022 First Information Meeting of MS&AD Insurance Group Holdings. We really appreciate your presence. My name is Miwako Kaneko of Corporate Communications and Investor Relations department. [indiscernible] for this meeting. Now ladies and gentlemen, let me introduce to you the attendees from MS&AD. First of all, the presenter for information meeting today, Noriyuki Hara, President and CEO. From the left-hand side is from you, Masashi Ippongi, Executive Officer and CGO. Satoru Tamura, Senior Executive Officer and CRO of the group. And then Tetsuji Higuchi, Executive Vice President and Executive Officer and Group CFO. Tamaki Kawate, Executive Officer in charge of International Business. Takuma Hayakawa, Executive Officer in charge of Investment and Financial Services Business. Today, in this information meeting, first of all, our President, Hara, will make a presentation following the materials. With respect to your questions, we have set aside some time for Q&A after the presentation. So let's move on to the presentation. Mr. Hara, please?

[Interpreted] Hello, everyone. I am Hara. Noriyuki Hara, the President and CEO of MS&AD Holdings. Thank you for taking the time to attend our information meeting. The spread of COVID-19 is still unpredictable, but vaccination is progressing and the economic activities in the new normal are gradually resuming. As in the previous meeting, this event is held in a hybrid format, and we're very happy to have even more people than before come to the venue and communicate directly. On the other hand, when we turn our attention to world affairs, the Russian military invasion of Ukraine has destroyed the lives of many people, and has also brought about rapid inflation and delayed economic recovery in the world. Amid the emergence of various risks that threaten the security and the safety of the world such as pandemic, geopolitical risks and anticipation of natural disasters, the power of insurance is increasingly required. Our group has placed CSV as a foundation of its management since the previous medium-term management plan that started in 2018. In 2020, the year I became the President and CEO of the holding company, we launched the CSV by DX by Global Strategy. And in fiscal 2021, we laid out our group's aspirations for fiscal 2030. The new medium-term management plan, which starts this fiscal year, will be a period in which we will accelerate our efforts to achieve our aspirations for 2030, based on CSV x DX x Global. By promoting the new medium-term management plan, we hope to contribute to the resolution of diversifying social issues and achieve sustained strong growth in our group. Now let's start today's presentation. Please turn to Page 4. First, I would like to briefly discuss the achievements and challenges of the previous medium-term plan, Vision 2021. After that, I would like to explain the outline of the new medium-term management plan. So please refer to Page 6. First, let's look at the financial results for fiscal 2021. As for the group adjusted profit, the international business fell short of the plan, mainly due to an increase in overseas natural catastrophes while the domestic non-life insurance business posted a profit exceeding the plan due to a low loss ratio in auto bill insurance and strong investment profit. In the domestic life insurance business, many policies at MSI Primary Life reached their investment targets due to the rapid depreciation of the yen, thus reducing the burden of policy reserves. As a result, the profit largely exceeded the plan. As a result, the group adjusted profit was JPY 347.1 billion, approximately JPY 50 billion above the Vision 2021 target of JPY 300 billion. The group adjusted profit of JPY 347.1 billion, and net income of JPY 262.7 billion were both record high. The group adjusted ROE was 9.5%, 1 percentage point higher than the forecast of 8.5%, 1 step closer to the medium-term target of 10%. The status of achievement of each of the indicators as targets in Vision 2021, as shown on Page 9. Although, we were 1 step away from achieving capital efficiency, we were able to maintain our target levels for sale, financial soundness and profitability throughout the period. The results of the 3 key strategies are shown on Page 10. We achieved steady results and improving productivity through the use of group's comprehensive strengths and in promoting digitalization. As for portfolio reform, while profits in the domestic non-life insurance business were strong, overseas operations were affected by natural catastrophes and inflation, and we were unable to meet our targets. However, we will continue to work on this as an ongoing issue in the new medium-term management plan. Overall, both the Domestic Non-Life and Life Insurance businesses have steadily increased their earnings power and profitability. In our international business, we are making steady progress in improving AULs portfolio, although overall efforts are still in progress. Under the leadership of the new CEO, AAG is working to improve its portfolio by significantly reducing the risk of natural catastrophes. We will work to further increase profitability in the new medium-term management plan. Please look at Page 12 for details on shareholder returns in fiscal 2021. The dividend per share in fiscal 2021 is JPY 180, up JPY 25 from the previous year. We decided to implement a share buyback of JPY 50 billion for a total of JPY 75 billion in addition to the JPY 25 billion announced on November 19. Since the establishment of the group, the dividend per share has been steadily increasing every year, and the total return has been steadily increasing. Next, I will explain the outline of the new medium-term management plan. Please turn to Page 14. Since the funding of our group, our mission has been to contribute to the development of a vibrant society and help secure a sound future for the planet by enabling safety and peace of mind through the global insurance and financial services business. This mission is understood by more than 95% of group employees and is deeply ingrained in group activities. In recent years, more and more companies have adopted the concept of purpose management. And I believe that our group has put this concept into practice ahead of others. The new medium-term management plan aims to realize our mission based on a story of value creation that addresses social issues and provides customers with peace of mind and safety. In recent years, a variety of risks have emerged, including pandemic, geopolitical risk and their impact on supply chain. As a result, the business environment surrounding us is changing rapidly with accelerating inflation and fluctuations in interest rates and foreign exchange rates. Also, the ever-advancing technology has a huge impact on our business. Based on this environmental awareness, our group has been working on CSC with the SDGs as leading marks since the previous midterm plan, in particular, from stage 2 the CSV x DX x Global strategy has been developed and spread throughout the group. In the new medium-term management plan, which starts this year, we intend to fully implement the CSV strategy, and show results that will lead to long-term growth. These are our qualitative targets as a platform provider of risk solutions, we will help solve social issues while growing together with society. Next, I will talk about quantitative profit. Please look at Page 18. In quantitative terms, we aim to achieve an IFRS-based net income of JPY 470 billion to JPY 500 billion, and a stable adjusted ROE of at least 10% by fiscal 2025. By doing so, we hope to achieve a profit scale and profitability on a global peer level. The application of the International Financial Reporting Standards is scheduled from fiscal 2024. In the first 2 years of stage 1, the Japanese standard is applied as before. In the final year of stage 1, fiscal 2023, the target for group adjusted profit is JPY 400 billion, and the target for group adjusted ROE is 10%. The following is a supplementary explanation of the forecast for fiscal 2022. The group adjusted profit for fiscal 2022 is expected to decrease from the previous fiscal year due to the various incidental factors described on Page 19 for both fiscal 2021 and fiscal 2022. Excluding these incidental factors, the profit is expected to increase by approximately JPY 32 billion. I will now explain the structure for achieving the profit targets in fiscal 2025. Please turn to Page 20. In order to achieve the IFRS base net income target for fiscal 2025, we will need to increase the group adjusted profit by approximately JPY 170 billion to JPY 200 billion from JPY 302.1 billion in fiscal 2021 based on actual results. The breakdown is as follows. In the Domestic Non-Life Insurance Business, approximately JPY 80 billion due to improvement and profitability of fire insurance and other factors, approximately JPY 10 billion in the Domestic Life Insurance Business, approximately JPY 68 billion in the International Business due to profit growth of MS Amlin. Approximately JPY 4 billion in the financial services and risk-related service businesses. Additionally, the impact of IFRS is approximately JPY 30 billion. Page 21 compares our group to global peers. As shown here, our group has achieved a higher EPS growth rate than its global peers, and we are aiming for a profit growth of above 10% during the period of the new plan. Next, I will explain the basic strategies of the medium-term management plan and the foundations that support them. Please refer to Page 22. The 3 basic strategies are value, transformation and synergy. We will also strengthen sustainability, quality, human resources and ERM as the foundation for the basic strategies. The first basic strategy is value, value creation. CSV x DX will be developed globally to provide new value to all stakeholders. Specifically, we will implement the MS&AD value strategy to develop and monetize products and services before and after insurance coverage. In addition, MS&AD interest will play a central role in advancing risk consulting using data and digital technology. Second is transformation. This is essential to flexibly respond to changes in the business environment and achieve sustainable growth. Following Vision 2021, we will work on product portfolio transformation, business portfolio transformation and risk portfolio transformation. We believe that it is important to strengthen the DX foundation in order to advance transformation. Our group founded MS&AD ventures, which has invested in more startups than any other insurance company in the world. We have also developed the MS&AD Garage program and the innovation factory as mechanisms for utilizing the knowledge gained from the start-up investments to transform our business in various countries around the world. We also have a wealth of data accumulated over 100 years of history and have worked to develop digital time. Leveraging this foundation, we will use digital technology to enhance customer experience and improve operational efficiency while creating innovative new business. Finally, synergy is an important theme for connecting diversity, the strength of the MS&AD Group to further growth. So 1 platform strategy is the key. In order to take full advantage of our scale, having the largest share among non-life insurance companies in Japan, we will broadly promote group-wide standardization, collaboration and integration of the middle and back offices of MSI and ADI. Specifically, we will clarify the areas that remain as differences based on each group company's strength, and promote the standardization, collaboration and integration of other areas. In terms of synergies between the Life Insurance and Non-Life Insurance businesses, we plan to increase the cross-selling ratio by Non-Life Insurance agents to 25% from the current 18%. We will actively work on global synergies. We will pursue synergies among group companies and invest in and outside of Japan, in all areas, including insurance products, claims services and DX. In the midst of drastic changes in the automotive environment such as case and [indiscernible], Mr. [indiscernible] has taken on the role of pilot for the group's innovative initiatives. Taking advantage of flexible product development capabilities and rate management, [indiscernible] will take the lead in developing new products, services and sales styles and share its know-how throughout the group. Next, I'll talk about the foundations that underpin the 3 basic strategies. The first one is sustainability. Aiming to resolve social issues of high importance to both our group and its stakeholders, we have identified 3 priority issues, [indiscernible] with the global environment by their health, safe and secure society resilience and happiness of diverse people well-being. As for planetary health. We will take various measures to achieve a target of net-zero by fiscal 2050. We announced last year, together with the measures to combat climate change that is carbon neutral. We will work on improving the sustainability of nature capital -- nature positive. Our group has long promoted initiatives to conserve biodiversity. We also play a leading role in the field by participating in the task force and nature-related financial disclosures, [ CMFD ]. The cost of the carbon neutral and nature-positive are interrelated, and we'll work on both of them. As for resilience, this involves various risks associated with changes in social structures and the development of new technologies. Our mission is to provide products and services that address these new risks. In addition to compensating for economic losses, we will actively work on disaster prevention and mitigation. Finally, with regard to well-being, we will promote initiatives from the 3 perspectives of addressing health and longevity, respecting human rights and improving employee engagement. Please refer to the KPIs for each initiative on Page 28. Next, our initiatives for human resources. Raising employee engagement is the cornerstone of our initiatives. In order for the group to achieve sustainable growth, it is necessary for the group and its employees to move forward in tandem. We will work to increase engagement and productivity by securing human resources to support the execution of our strategies and developing an environment where employees can play an active role. This month, we introduced a stock incentive plan for all of approximately 40,000 employees. We grant our own shares to our employees as an asset-building opportunity. This is a system that aligns all the achievement of the medium-term management plan goals with employee incentives, and raise awareness of the importance of corporate value enhancement. KPIs for human resources and quality are listed here. Now let's talk about strategies by business domain. In the Domestic Non-Life Insurance Business, we will continue to aim for strong growth by taking advantage of our strengths with 3 distinctive insurance companies, the largest sales coverage in Japan and the strong network. In addition to maintaining the profit scale of automobile Insurance, we aim to increase profits by promptly making fire insurance profitable and accelerating the expansion of casualty insurance. In addition, we will accelerate our growth wide efforts to reduce expenses from the previous medium-term plan, and further strengthen profitability. In the Domestic Life Insurance Business, in addition to cross-selling with 2 non-life insurance companies in Japan, we will seek to expand the market by strengthening cooperation between the 2 life insurance companies to take advantage of the strength of their respective sales channels. In the International Business, in addition to improving the MS Amlin business portfolio, we will work to strengthen existing business, including the retail business in Asia, where we have strength and the expansion of telematics insurance. At the same time, global synergies will be realized by deepening cooperation and collaboration among overseas entities in various fields, such as reinsurance and asset management. We will also consider investing in the United States that have a high potential market as well as in Asia, our competitive region and emerging countries. Let me talk about more details on the profit recovery of MS Amlin where profit growth is particularly large. Please refer to pages 34 and 35. MS Amlin has been under severe conditions due to a series of natural catastrophes, the COVID-19 pandemic, and the impact of global inflation. In order to maintain a stable profit even in the bank of such large-scale losses, it is necessary to diversify the portfolio and expand each line so that a large-scale loss in 1 line can be compensated by the profit of other lines. As a result of structural reforms carried out in January 2020, the SBU Management System across MS Amlin, the strategic business unit management system across MS Amlin, was changed to the system of management by each company. As a result, we have shifted from a mutually complementary business strategy that takes advantage of each company's strengths. The reorganization and downsizing phase is over. And MS Amlin is entering a phase of return to growth under a renewed management team. As for AUL, which is responsible for the Lloyd's business, it has already been working to be selective in natural catastrophe risks in North America, and to reduce the volatility of non-GAAP risks and improve profitability. The combined ratio is less than 100% in most non-cat lines, and we intend to further improve profitability, and expand the portfolio. As for AAG, which is responsible for the reinsurance business, it will further diversify underwriting lines while mitigating natural catastrophe risks. We are already reducing the non-cat risks, and they account for around 10% of the total. During stage 1, we plan to take advantage of the market hardening and establish management foundations, such as IT to develop further growth strategies from fiscal 2024 onwards. The risk-related services business plays a central role in the group as a platform provider of its solutions. We will use digital technology and data to advance the risk management services with MS&AD in the risk. At the core, we will expand into new business areas. In the Financial Services Business, we will provide financial products and services that address social issues by taking advantage of the characteristics of insurance companies, such as weather derivatives. Next, I will talk about asset management strategies. Please refer to pages 39 and 40. Investment profit is an important source of profit for the group. In order to achieve this growth, we will increase the amount allocated to assets that are expected to generate profit, and strengthen our profitability through private equity in Japan and overseas and renewable energy investments. We will also utilize investment opportunities, information and technology within the group to realize group synergies. MSR and asset management companies established in New York in January 2022 will serve as a hub for the expansion of assets with profit expectations. We will also work to strengthen the training of experts and foreign asset management to further increase the investment profit. Finally, I will talk about the capital strategy. Please look at Page 41. Improving capital efficiency is one of the top priorities of our new medium-term management plan. To this end, we are working to improve capital efficiency by optimizing capital allocation. The first step is to allocate capital to more efficient businesses by improving business management and implementing flexible capital flows. This will increase profits and capital, which will be used to make more efficient business investments. We will increase returns to our shareholders by recirculating capital. Page 42 shows a concrete explanation of the sophistication of business management. We will strengthen ROR and BA monitoring for each business of each group company. For businesses that do not achieve ROR equivalent to 10% of the group adjusted ROE, we will clarify issues and consider and promote measures to improve ROR. In the case of businesses that are not expected to improve, and have lower growth potential, we will consider withdrawing and allocate capital to more efficient businesses. In addition, the holding company should always keep track of the transferable capital of each group company and assume how the assets will be transferred in advance. By doing so, we will establish a system that enables the flexible allocation of capital to more capital-efficient business opportunities. Our business investment policy is described on Page 43. We will increase the corporate value by efficiently implementing 3 types of business investment. Investment to strengthen competitiveness such as IT investment, investment to diversify and expand our business portfolio, such as M&A, and investment to create new business areas such as startup and investment. All investments should be considered with a clear focus on ROI and investment efficiency. In addition, we will reduce risks with low ROR, and allocate capital to risk with higher ROR. The reduction of interest rate risk and life insurance was completed by fiscal 2021, and we will continue to work to reduce the risks of strategic equity holdings and overseas natural catastrophe risks, which are the peak risks. As of March 31, 2022, ESR was 228%, down 7 percentage points from the same period of the previous fiscal year as a result of the redemption of subordinated bonds and enhancement of risk measurement. The target range for ESR under the new medium-term management plan was raised by 30 percentage points from 180% to 250% in order to accumulate capital to support business investments. Finally, I would like to explain the shareholder return policy of the medium-term management plan. We will carry out shareholder returns through dividends and share buybacks based on a benchmark of 50% of the group adjusted profit in the first stage, fiscal '22 and fiscal 2023 of the medium-term management plan. And 50% of the base profit for shareholder returns in the second stage, fiscal 2024 fiscal 2025. In addition, we will flexibly implement additional returns in light of market trends, business environment and capital conditions. Specifically, we plan to implement returns in the event, but the target range of the ESR described earlier is constantly exceeded, or when it becomes difficult to foresee efficient investment for growth. The group adjusted profit for fiscal 2022 will be lower than in fiscal 2021, but our group's earning power, excluding onetime factors, is steadily strengthening. As a result, we expect a dividend per share to increase by JPY 5 to JPY 185 in fiscal 2022. In the new medium-term management plan, we added the subtitle, grow together with society as a platform provider of risk solutions. We are determined to grow together with society by becoming a provider of various risk solutions. Leveraging the strengths that our group has built up over the years, we will draw on group synergies to actively promote CSV initiatives that leverage the power of digital technology. In addition, we will further strengthen initiatives aimed at increasing profits in the international business and improving capital efficiency, both of which are issues facing our group in order to steadily achieve the targets that are in the medium-term management plan. We will continue to strive to meet the expectations of investors and other stakeholders, and we look forward to your continued support. Thank you very much.

[Interpreted] Thank you, Mr. Hara. Now at this time, we would like to move on to the Q&A session.

Muraki, SMBC Nikko Securities. I have 2 questions. Well, actually in that 1 major question. You set the target of profit of JPY 470 billion on Page 18, the market capitalization. This is twice of debt in terms of PR is 5x in terms of PR. I think this is clearly indicated that the market is not confident about your ability to attain those higher profits. So in that in terms of the profit improvement of the profit of both international business and domestic business. Starting with international business first. Looking at the international business, starting in the current fiscal year and next fiscal year, you're expecting rather substantial profit increase. The JPY 20 billion was the direct impact of Russian invasion into Ukraine. And if it is added, that will show JPY 84 billion. So you're expecting rather substantial profit improvement. So could you just share with us some assumptions for the profit of our next fiscal year? So that's the first question. And the second part relates to the Domestic Non-Life Business. Here, up until fiscal 2025, you're expecting rather a sustained substantial profit increase. Compared with the current fiscal year, you're expecting JPY [ 76 billion ] improvement, and I think substantial profit is expected to be generated by the positive profit from fire insurance. What about the motor insurance, and also the expense improvement? In terms of expense improvement, there will be 2-point reduction compared with the current fiscal year. With the premium income totaling JPY 3 trillion, the 2-point reduction would mean that substantial amount of improvement in [indiscernible] from the reduction. In terms of pre tax cost reduction of JPY 60 billion, what is the attainability? And can you interpret that to represent your commitment to that?

[Interpreted] Thank you for your question. You had 2 major questions. One related to the international business. And from the current fiscal year and next fiscal year, we mentioned that we are expecting a rather substantial increase in profit, and you wanted to know the specifics of that. I will have Mr. Kawate respond to that question. For International business, Mr. Kawate will respond to that.

[Interpreted] Thank you for your question. For the current fiscal year, as you pointed out, as shown on Page 19, the impact of Russia and Ukraine, the losses stemming from that is incorporated in the current fiscal year result, but that will be eliminated from the next fiscal year's results. But there are factors not shown at this stage, which includes the follows. From the very beginning of the year, the investment activities especially relating to Amlin because of the market-to-market, that being under a downward pressure. But in the current fiscal year, we started from the lower investment returns. But next fiscal year, we are expecting returning to the normal situation. That's 1 point. And for the next fiscal year, not a substantial amount, but some business investment, it assumes that would result in accumulation of profits. And also with respect to existing business, both in Amlin and Asian businesses, the market is hardening. And with that as a tail of wind, we will expand top line and pursue profit increase, especially AUL and AAG, the solidified consolidation of the foundation, especially in the case of AAG, but supported by the hardening, it is already in the phase of expanding the [indiscernible]. So that is in the background of expected increase in profit.

[Interpreted] One other question related to Domestic Non-Life Business, especially with respect to cost reduction and the -- to what extent are we confident about achievement of that? Or if that represents our commitment? Mr. Higuchi will respond to that question.

[Interpreted] Higuchi speaking. With respect to the domestic business, if we turn to Page 20. As shown in that slide, the green part -- the part change that refers to the domestic business, and fire insurance and casualty and others are shown here. In terms of expense reduction, rather than just expense reduction stand-alone basis, but it is allocated to different lines, and that's why there's indicated this. JPY 58 billion improvement in balance of fire insurance does not come only from the business, but also that also includes some business expense reduction as well. And in terms of improvement expenses, the amount involved there in this plan, approximately JPY 50 billion improvement is incorporated in the plan. As Mr. Muraki mentioned, he cited the figure JPY 60 billion. So there is a difference of JPY 10 billion. So where does this JPY 10 billion exists is maybe the question. But actually, JPY 50 billion is incorporated in the plan as expense reduction. Now this JPY 50 billion, you asked whether it represents our commitment. We intend to have a very strong commitment in achieving this expense reduction. So please understand it to represent that. And therefore, in terms of profit expansion of Domestic Non-Life Business, the improvement of profitability of fire insurance, the pricing adjustment and also the review of underwriting conditions -- terms and conditions and also expense reduction. And in addition to that, in other areas, especially will expand casualty insurance. So earned premium will be accumulated solidly. And those are the factors that will contribute to the expansion of profit I mentioned earlier.

[Interpreted] Thank you with respect to the second aspect of my question from over the years, focus by 2025, the expense target has been shown or announced. And in terms of investment for growth for fiscal 2025, it assumed that the business investment disappears almost and that was what announced in this closure in November. For the current fiscal year as well, including Life Insurance expense increased substantially, which means you may be referring to this as [indiscernible], but in 2025, because of some investment in business activities, the expense may not decrease as we expect, and that may happen in the entire industry. But what about that risk? How do you assess that potential risk?

[Interpreted] Mr. Higuchi will respond to that question as well.

[Interpreted] First of all, in terms of a Domestic Non-Life Insurance Business and the improvement take expense there for over the years, we have attached tremendous importance to that particular aspect as very important priority issues. We have been working on the expense improvement. And therefore, the improvement of expense, which is expected in this medium-term plan is something that we would like to achieve by all means as a priority issue. In terms of the investment for growth, how should we assess and consider that? Of course, we will conduct investment for the growth and that we will continue to do that. But the improvement of expenses will be worked on. So we will not allow those investments for growth to affect negatively the expense improvement efforts. So the 31% for 2025, we will try to achieve that level. And as I mentioned earlier, compared with '19, we'll commit to an increase of JPY 100 billion in 2025. And we are working on 1 platform strategy, as I explained earlier. So taking advantage of the strengths of different companies. And at the same time, we will take advantage of the differences retained, and that could generate strength, but that aspect is not incorporated reflected in the plan. So that will be add-on to what we stand right now. Thank you, Muraki.

[Interpreted] Daiwa Securities. Watanabe, please?

[Interpreted] Watanabe from Daiwa Securities. I have 2 questions. First is with regards to investment. And if you could look at 45, ESR target range, the upper limit is rate study 2 points, and then [ 2.4 ] We think that's about JPY 120 billion. And so what's changed in terms of your view toward investment this time? The second question is on Page 46. This is with regard to shareholder return. And you have the DOE concept with regard to shareholder return. But this time, you are saying basic return, and 50% of group adjusted profit dividend and share buyback, what is your priority? And then on the other side, it has a dismal return. In other words, capital-efficient improvements is set when it is determined that that's necessary. So what indicator are you going to use the judge capital efficiency improvement? So ESR range [ 250% ], and then that's about JPY 700 billion according to calculation. And with regards to business investment, has the view changed? Second is about shareholder return, and the DOE is not indicated here. And has the DOE concept changed? And about the additional return, capital efficiency, what are you going to use the judge capital efficiency? I think that's the question.

Higuchi, if you could answer the questions.

[Interpreted] Higuchi speaking. So with regards to investment, our view of investment. So the ESR target range, 30% or about JPY 700 billion with as you say. That's about the size. And with regards to the investment opportunities, when we think about that, there are various opportunities, and we need to capture them in an agile manner and making our investments. And so -- well, ESR, to the extent possible, we would want to have the bottom side of the range, you can think in that way, but if you think about the overseas markets right now,evaluation is very high, so that solid returns -- investment opportunities to achieve solid returns may be difficult, but what kind of situation may change due to changes in the business environment, naturally, that's possible, for example, something like Lehman shock. When that happened, that led to a big drop in valuation. So we have to be able to move in a flexible manner, and that means that we have the funds available for investment. Therefore, at 30% -- what we have here, 30% and would like to use that. And with regards to the shareholder return, there is 50% of adjusted profit is the basis. The basic view here is not all that different from the past. We had said 40% to 60% of group adjusted profit in the past. So that will be the range. And so which part of 40% to 60% are you going to use is a question that we received on occasion. And it was a bit difficult to comprehend. So we said half will be returned. And so we made that quite clear. As for the additional return, well, it's a bit related to the additional return side, too. We said 40% to 60%. That means 40% is the basic return, and then there could be 20% additional return, but then people will say, well, that's the normal range and -- for what outside that range, there could be additional return, and that can be done in a pomp and flexible manner. And we have organized our thoughts in terms of the bullet points indicated. As for DOE about 3%. And in the previous medium-term plan, that's what we said, and that's what we have been operating under. But if you think about the current situation, it's a bit difficult to use. In other words, well, DOE could become kind of a [indiscernible], a constraint, and dividend amount could end up being fixed. So it was a bit difficult to use. And therefore, this metric of DOE is not used. So that's a change that we made. And another thing in terms of additional return about the capital efficiency improvement, what indicators are going to look at. Basically, ROE. That's all.

[Interpreted] Can I ask another set of questions about shareholder return? So what will be the additional return in terms of the ROE level? And then -- in [indiscernible], you have the total returns, and it was upward stopping. And well, it was so good last year, and it's not half this year, but are you going to continue on this trend? So what percent ROE? We don't have a specific number for ROE? In other words, we're going to look at the various business environment and the situation and make adjustments. So it will be 1 indicator that we will use. And on Page 12, about the total return amount and the increased expense. Well, for 1 thing, the dividend per share in a stable manner, an increasing trend is what we want to emphasize, what we value. And in terms of the total shareholder return to what extent, are we going to maintain its expansion? Well, that has to do with the profit forecast going forward, the volatility of profit may increase going forward. So to what extent can we maintain this trend? It might become a bit difficult. So this shareholder return expansion, in terms of the absolute expansion is not something that's a must.

Thank you, Mr. Watanabe. Let's move on to the next question, which will be by the participation through Zoom. [indiscernible] Morgan Stanley.

[Interpreted] My first question relates to the return -- shareholder return as well. You've made various changes for this time. And in terms of the spot, we do take great flexibility in the case of other companies, this part, which is subject to flexibility for almost every year, they examine the situation almost every year and annually. And what about your company's approach to that? That's a small question number one. And the small question number two. You exceeded the plan, and therefore, the return is higher. And relative to the adjusted net profits. And in my case, I also take into account the embedded value compared with that, the return is 3.7%, okay? So other 2 companies, it's about 6% and 5.4%. And therefore, I like to give some additional return. And if you stick to this 60%, your return rate will be [ 3.3% ], whereas your competitors maybe retain the level of the previous fiscal year. In terms of ROE, I mean, J-GAAP based at ROE may the profit and therefore make adjustments to net set and also the adjusted net asset amongst those 3 companies, ours is relatively lower. In that case, you really have to make adjustments to itself. And otherwise, you really have to increase the return. So on that particular point, what did you focus on in your consideration in sorting out your thinking? That's the first question. And referring to Page 33, which relates to the international business. In the case of Amlin, the plan to increase profit at Amlin, I do understand what your intent on and compared with the fiscal '21, that makes the comparison more difficult. The group adjusted profit of international business, the expectation is for a year's JPY [ 64 ] billion for March '22. But if you eliminate those visual factors, that means JPY 98 billion. Equally on Page 3, on the left-hand side, you see Amlin and on the right-hand side, the international business and investment that totals JPY 110 billion. So from JPY 98 billion to JPY 111 billion, that's a bit small, but in terms of Amlin, there's must have been solid improvement as they are in. So what's going on? What's taking place? And that's what I would like to know. That's all my questions. There must have been solid improvement there in. So what's going on? What's taking place? And that's what I would like to announce. That's all my questions.

the first question related to the concept behind the additional returns, how that is sorted out, and Mr. Higuchi will respond to that first. The part where we exercised flexibility, when that will take place or when the consideration of that will take place was your first question, I believe. Now -- as far as this is concerned, almost every year, we'll do that, and we study what approach we are going to say, but we are going to decide on. So that's how we take that flexibility compared with the adjusted net assets and your calculation to [ MS&AD ], I think the return based upon dividend was use for that calculation for your calculation? No, no, no. I also added share buyback as well. So you use the total amount of shareholder return, yes. So -- and that is compared with the adjusted net assets relative to the adjusted assets, how that calculation takes place. Of course, we also examine that and consider that. But rather than that particular aspect, from the overall perspective, from our company, our competitors are focused more on cash dividend as the shareholder return and additional adjustment is made through share buybacks is same. That seems to be [ overtaken ] by our peers. But in our case, partly because our PBR is rolled and basic return consists both of our cash dividend as well as a share buyback and will resort to both of these. And in addition to that, I will consider additional returns and we give thoughts to that. So that's our approach. In order to enhance the returns, adjustment of is one approach [ for ] expand the profit, both are possible. But basically speaking, we try to strike a good balance between these 2 factors and actually exercising the payment returns. Especially, we'll work hard on expanding [competitself]. So that's our basic concept that adjustment for net assets and also the expansion of profit and refocus on both of that in conserving that additional parts. About the second question, which was related to the international business and the structure of expanding profit going forward and you have said that's a bit difficult to understand. So Mr. Kawate will respond to that question.

Thank you. Kawate speaking. Thank you for your question. First of all, in terms of the confirmation numbers, please refer to Page 18 and 19. And as [i just ] mentioned, in fiscal 2022, the international business, the group adjusted profit of JPY 64 billion. And on Page 19, there are various special factors. In the case of [overseas business] was JPY 28 million, so totaling the book for fiscal 2022, the total will be JPY 92 billion. So that's a certain point and starting from there relative to that of JPY 92 billion. Moving on to Page 33, which you referred to. According to this chart, the left-hand side shows [Amlin], which is JPY 39 billion. And on right-hand side, JPY 72 billion, the combined total of the 2 is 100 loans. So from this for 2022 -- and moving on to 2025. The [non-Amlin] profit increase of JPY 20 billion is too slow. And that is meant in your question according to my understanding. So other than Amlin, other MS regional business and AD businesses. in and after fiscal 2022, the profit increase is our plan to be [ JPY 20 billion. ] And we also took into consideration the certainty of achieving debt, the improvement loss ratio of different entities in those areas. And so we took a rather conservative approach [ we're in ]. And in addition to that, [ JPY 18 billion ] coming from business investment is already planned as an addition to that. So in the existing business, the profit increase is around JPY 20 billion as planned here. But at least you understand that reflects the conservative as we look in our approach. Did that answer question?

Yes.

So another Zoom participant from Nomura Securities, Sakamaki.

Sakamaki from Nomura Securities. I would also like to ask 2 questions. First question, capital policy related. So the commitment to obtain ROE in this medium-term plan, I'd like to hear the views of management, and it was 9.5% in the previous plan, but it's still a bit in the distance. And this -- yes, I understand the domestic growth and those international situation, but there's the temporary factors too, but you have investment pipelines and ROE. I'm wondering if there's a risk that it may remain low. So in the next NPP, what is the commitment. Has your view changed from the previous medium-term plan? That's the first question. And then the second question, the top line target for domestic market for fire] yes, rate revision. And for the casualty profit, I don't think we've heard your view on the profit top line for the casualty. Can you explain that?

Thank you for those questions. So first, is about the commitment to attain the ROE, what is the structure for the 10% of ROE. And [indiscernible], please? [indiscernible] speaking ROE -- on ROE. So there's the equation. I think it was appearing somewhere. And in this medium-term plan, the target is 10%, and that's what we have been upholding. And there are temporary factors and the profit due to that. And if you exclude that, it might be lower than 9.5%, as indicated, maybe about a little more than 8.5%, I think. And so in calculating ROE, the equity or the denominator, share price went up, and so that increased. That's 1 factor. And this is the original assumption. And when we made the plan, the Nikkei average assumption was used in terms of net assets. And so the number of 10% was considering those net assets also with temporary factors. And the market will have an impact. And this time, in this medium-term plan, in terms of net assets, what is our view? Well, the strategic equity holdings have hidden profit, and that's excluded from the net assets, and that's our thinking. And as explained earlier, after 2024, IFRS accounting standards will be used. We will be shifting to that standard. And in IFRS profit. The capital gain of stock sales is not included. So we have to have consistency between the numerator and the denominator. And I talked about the variance due to market fluctuation and you exclude that so that you can get the pure results of management. And that's a rather lengthy explanation. But from that perspective, what we are indicating now in terms of ROE, whether it's the noise or impact from market fluctuation, which will disappear. So the ROE that we are indicating, I believe that we can clearly commit to that. Yes. group adjusted ROE was explained and to attain ROE, return profit has to be attained for sure. And that is our commitment. As explained earlier, for international business too, and also non-life in Japan and life insurance business in Japan. We have steadily gained the earning power, so we're going to promote that further and aim for [ JPY 470 billion ] to JPY 500 billion to meet your expectations. The second question, the casualty top line and [indiscernible] will explain this.

Thank you, [indiscernible] speaking. With regards to casualty insurance, and I think we've talked about this in the past. There's the SME market, which is still -- which still has room to grow in terms of casualty insurance. So there are new products which can be used and also the market can be created. And that's an important pillar of our strategy. In other words, the market still has the capacity to grow. And therefore, we are going to utilize on this. And in 2025, I don't have the specific numbers with me for the casualty. So this is the qualitative explanation on the trade. Secretary, do you have the concrete numbers.

So Page 58, if you could refer to 58. That is for 2025. Outlook for net premiums with net, it's JPY 328.5 million. And then that's going to be the JPY 460 million. So that's the outlook for 2025. It's on Page 58.

Yes. Sorry, I missed that in the materials.

Thank you very much, Mr. Sakamaki. And then I would like to invite somebody from this -- Mr. Majima, please.

Thank you. [indiscernible] is my name. Thank you for the opportunity. In the earlier pages, you refer to IFRS profit for fiscal 2025, you said the profit target based upon IFRS, you mentioned. As you transition to IFRS, as we mentioned earlier, the capital gains on strategically held securities is not included and also catastrophe loss reserves, the addition of withdrawal from that will also not excluded. But in addition to -- on behalf -- instead of that, there will be some other reserves. But the company will continue to receive some impact from natural catastrophes. But even that is taken into account, you will set the target in terms of IFRS profit. And you make some adjustments to that to try to reach that target. Is that how you approach. And there are companies that do not transition to IFRS. And if the company is affected by natural catastrophes, there could be substantial difference in the basis for comparison. You are not paying attention to that, that doesn't follow you at all? That's the first question. The question number two relates to Amlin.

And the President mentioned that the natural catastrophe risk is reduced or eliminated and also the tighter standards is applied for non-cat risk underwriting. But even that those factors are considered. For the current year, the Ukraine, Russian war caused a JPY 20 billion losses. This is the largest in my 3 companies. And I hear that some of the companies excluded those war-related losses, but you have underwritten those. But at the same time, you mentioned that you have reduced natural catastrophe risks and also tightened the standards for [Non-cat reserves] So we're taking tighter guidelines underwriting is for natural stripes on Non-cat areas and even before that for COVID-19, even those unexpected risk takes place. I have the impression that amongst the 3 major insurance companies, you are hit by the largest amount. So given the current situation of Amlin, if the unexpected risk takes place, we will be -- hit the hardest amongst 3 companies, and the opportunity to be the case. And I right in understanding the situation in that manner. Your first question related to the IFRS base net income target. And your question related to the basic plans behind that, and here will respond to that question. In terms of IFRS-based profit and setting the target based upon a net income. On that particular point, yes, we intend to set the target in terms of IFRS-based net income between Japanese GAAP and IFRS accounting standards. The difference between the 2 is mentioned on Page 101 in the information material that's toward the end of the material, 110. As was mentioned, under IFRS, the catastrophe fuel reserve is eliminated. It doesn't exist and also the amortization doesn't exist because of that, and it will be affected by mark-to-market accounting. That is to say the impact of the market fluctuation. It will be sent and also in the case of long-term policies, especially the stronger impact will be felt. But the new policy acquisition expenses under the Japanese GAAP and it is before the upfront. But under the IFRS, it is amortized over the duration of the policies as they incurred. So those are the differences between Japan GAAP and IFRS. And also the capital gains on strategic realities is not improved in the IFRS base net income. So overall those positive and negative factors. If they take into account the IFRS-based net income tends to be bigger than Japan gap funding standards with a tune of JPY 20 billion to JPY 30 billion. So that's a very rough explanation of the difference. As you already know, the cat loss reserve is not included in IFRS. And therefore, when there is a huge natural catastrophe, the cat loss reserve was used under the Japanese GAAP, which is withdrawn, to make up for that natural catastrophe losses, but that cannot be done then IFRS-based accounting. So that causes greater fluctuation and volatility of profit. Let's start with -- the purpose of having IFRS is to align the accounting standards on the noble basis so that the compares can be made easier and on the same business. So from that perspective, we believe that following that purpose of IFRS, we have decided to adopt IFRS standards. And on that basis, we set this target. The existing target that we use, that is to say the Europe adjusted profit and the current target is set in terms of group adjusted profit. But in that case, we eliminated the impact of capital reserves. And therefore, in that sense, there is a major difference between the current group adjusted profit and IFRS. But as mentioned on Page 10 -- 110, there is factors describing the difference I mentioned. And therefore, the profit volatility will become bigger under the based accounting standards. As was mentioned by Mr. [indiscernible]. So the greater comparability on the global basis was the purpose of introducing this IFRS. So bearing that intention in mind, we have decided to adopt this system of IFRS. In addition to that, as I said, we will set our target based upon IFRS-based net income. But of course we need to continue to account. The financial results based upon Japanese accounting standards because of the management accounting purposes. And so in that sense the comparison with other domestic groups, which do not disclose their financial results based upon why IFRS can also be compared because we do also use the domestic gap. The second question related to the greater fluctuation or volatility of results of Amlin because when the [indiscernible] takes place. And that question will be responded to by [indiscernible]. Thank you for your question. As you correctly pointed out, we had COVID-19. And in February, we had the COVID wave in the United States last year. And also, we booked the impact of Ukraine war. So those unexpected events took place, but to certain extent, so long as you are engaged in business in [ voice ] market and also the business, the losses incurred due to those external factors or some unavoidable -- but in the case of Amlin, compared with its earning capability, the magnitude of loss caused by the unexpected demand was too big and that's why we have been working to improve that particular aspect. In the case of COVID-19, if you turn to Page 35 on the right-hand side, as shown there, on the top graph that shows the new pay property, and that no longer exist on the bottom part. That is to say, when the COVID losses occurred, we withdrew from the property underwriting in the United Kingdom. We still have reserves lingering on. So for fiscal 2021 for U.K. properties, from which we withdrew because of the continued losses there in the reserves, the profit of AUL was depressed downwards. But that's what we're spending, it produced underwriting profit, which shows the improvement there in on the part of AUL. And as shown on the right-hand side, the lines with less than 100% combined ratio has been increasing. So which means various lines exist on the right-hand quadrant. In 2021 in AUL, the combined ratio. If the impact of exited lines are excluded, the combined ratio is 92%, which clearly indicates that it's better than -- this is lower than the average of Lloyd's market overall. And last year, in Germany, there was a bit flooding loss. So consistently, the natural catastrophe risk, which had been large was being reduced by Amlin also by the headquarters. So we'll continue to downsize natural catastrophe risk that we underwrite in Amlin. And with respect to the loss attributable to war in Ukraine, we booked JPY 20 billion. But this stems from the expectation that we made in terms of IBNR combining both property and marine that totaling BRL 10 billion. And with respect to the remaining 10% because it is so uncertain and we do not ascertain what would be likely lost. But this is told the reserves for [Macro] potential losses. So in the case of war in Ukraine because the insurance industry as well as reinsurance market, this is something that has not been incorporated before. So going forward, the capturing and also management of accumulated risks not limiting to war event will have to be conducted in a more rigorous manner, and we consider that as a challenge. But in many respects, the basic earnings capability has improved in Amlin and, therefore, even if the other surprise might occur in the future, I think the Amlin will have bigger ability to absorb and make up for that. If I may supplement that, as shown on Page 34, Amlin used to be the holding company called Amlin plc, and it was the company that basically operated in Lloyd's and, therefore, AUL is the largest company and supplement that we had AAG and also the AI can see which is engaged in direct business in Europe -- in Continental Europe. And that was reorganized in 2021. And those companies are placed directly under the Japanese headquarters. In the past, AAG had the function of settlement and complement AUL. It is to say the amount of risk that AUL itself on its own cannot underwrite but underwritten by AAG. So those complementary roles are played by AAG, but we are now changing that. And in relation to that, as [scott] mentioned earlier, the property in the U.K. and casualty and those are the lines that have been exited. So withdrawing from those unprofitable lines, the AUL was down sized. And at the same time, we improved the reform the portfolio. And so the combined ratio -- and most of the lines has fell below 100%, which represents the improvement portfolio. So we are now in the phase where we are going to expand the overall size of the product. So that's something we do now have a better ability to have solved. And on Page 34, it shows AAG, which is engagement in the insurance activities. This is in its current 15%. We are now trying to reduce that even further. So the relationship between AUM and AAG, as I mentioned earlier, was complementary. But going forward, we are trying to take advantage of the strength and characteristics of each of those companies. So in order to do that, those companies are now improving the product activities. And with that, we are trying to enhance the ability to absorb those [in extent] in 8 of those companies.

Now a question from the Zoom audience, Bank of America Securities, Sasaki.

Sasaki speaking from Bank of America Securities. Can you hear me?

Yes, we can.

I have 1 question that I would like to ask. So I was listening to the presentation. The capital efficiency improvement is an important ROE is important and management is committed to this. These are very powerful words. But on the other hand, ESR model is comprehensive and the range is being expanded. So the incentives for risk of the [indiscernible] may be lost. So in the medium-term management plan at the Board of Directors meeting, you must have discussions. The outside directors, what kind of reaction or comments did they make? That's my question.

With regards to this question, for 1 thing, rent of ROE is committed by management. And then yes, our scope has expanded. So what kind of comment was heard from the outside directors at the Board of this meeting, [indiscernible]. With regards to the medium-term management plan at the Board of Directors meeting, we had many discussions. And each time the outside directors gave us a lot of input -- and in particular, ROE improvement for our group. It's one of the most important priority. And how is this to be realized. And to realize this, profit has to be increased. That is going to be extremely important. So towards the expansion of profit, there has to be risk taking, and we have to make challenges. So that was the kind of discussion that took place. And expanding the range of ESR and that would make the risk appetite too conservative. Well, basically, that was not raised by the outside directors. That point was not raised, but proactive risk-taking for profit growth and for higher corporate value. That kind of discussion did take place. As [ Higuchi-san ] has just explained, the -- actually, it was outside directors they said you should proactively take risk, and you could say that they were pushing us towards risk. Did that answer your question?

Yes. If I may ask as a follow-up question. In order to raise capital efficiency, there's return on risk, you have a certain rate and you're going to review it. And probably, for example, for strategic equity holdings, if you calculate that I think you will get the lowest number. And so I think you should speed this up many times. And so my impression is that, that attitude is still rather missing. That is sales increasing the speed of sales of strategic equity holdings that we are still not doing enough.

[Tamara], can you explain this?

[ Tamara ] speaking. Thank you for this point. So the sales of strategic equity holdings in this medium-term plan, JPY 100 billion and naturally with regards to the sale, we have to have a good discussion with the issuer and gain their understanding. And also, there is the dividend income from the strategically held shares.. So we have to look at the balance. And this time, we have made this kind of plan. With regards to the strategically held shares and the individual issues, there's the interest and dividend that we have to take into consideration. And through the strategic holding, what happens to the underwriting profit. So we look at the ROR individually and do the verification and that's discussed at the Board of Directors meeting. And in total, the strategic equity holdings, oftentimes teams are very good company so that the ROR if we include the profit of the insurance, it's a very high level. So that's taken into consideration. But we look at the peak risk that is overall. And therefore, every year, we reduced by about JPY 100 billion. So did that answer your question?

Yes.

I would like to designate those persons who already have their hands up. Mr. [indiscernible] Securities who are here.

I have 2 questions. First one relates to the impact of inflation related to the [Auto bill] insurance. In the new fiscal year, negative JPY 8 billion is expected to be the impact of inflation. But at the same time, the rate increase due to inflation might represent some positive aspect. From the viewpoint of management, what are the positive negative factors or impacts of inflation? And what would be its impact on medium-term plan? The second question relates to the [Auto bill] insurance. In the plan for new fiscal year, you are expecting a profit increase from -- revenue increase from autobilling shares, whereas your peers are expecting some decrease in revenue from that. So you seem to be quite bullish about your auto bill insurance. So compared with your peers, what is your view on the auto-bill insurance? Are you expecting to increase your shares, your collaboration with Toyota increasing going forward. So I'd like to know the actual auto bill insurance going forward.

The first question relates to the impact of inflation, both positive and negative factors and influences. This will be responded by [ 2 ] by [indiscernible]. As Mr. [ Okada ] mentioned, for fiscal 2022, we incorporated JPY 8 billion, the impact of inflation for international business. In terms of the impact or implement of inflation, there are several factors impacting our insurance students risk. For one, the payment of our claims is expected to increase due to inflation. So that's one of the impacts. And in addition to that, the expenses, especially the nonpersonnel expenses are expected to increase due to the inflation of these 2 are major investor inflation. In terms of claims payment that could be addressed by increasing premium going forward in the future. So that will be the characteristic of that because we expected inflation. We are going to increase premium. That's not something that we can do. So by looking at the result and actual claims payment, we will just adjust the rate or increase the rate by looking at the outcome. So we'll be behind the curve, so to speak, but we will try to catch up for the increase in [ claims ] payment. And this also is the same as expense payments. So there will be a greater negative impact on the performance of the company from inflation, I believe. And therefore, in terms of claims segment, of course, we need to pay claims as prescribed in the policies. But in terms of the expenses, considering and taking into account the inflation impact as we responded to in response to Mr. [ Muraki's ] question, we'll try to improve expense as much as possible. And therefore, the target of 31.7% expense ratio at 2025, we intend to exercise good control of our expansion. The impact of Russian-Ukraine, negative impact of [ JPY 80 billion -- JPY 100 billion ]. And before this board took place, we decided to incorporate the impact of inflation. So we added JPY 9 billion or so in addition to the margin itself. And therefore, we have been preparing ourselves for expected inflation. But as [indiscernible] mentioned, basically, we'll have to increase rates going forward, but we'll just -- will take place after the event. So that's what we are trying to do in addressing inflation. Another aspect of your question was our view on possible insurance and [Tamara] will respond to that question. In terms of domestic automotive insurance, and we mentioned that we tend to be bullish and it is quite right. Compared with our other groups, we tend to look at the auto-bill insurance in the bullish light. Both in the case of MSI and ADI, the -- we are focusing on telematics, auto-bill insurance, which reflected in minimal insurance, among others. And we introduced new products ahead of our competitors, and our marketing and sales capabilities are well established and using that as a weapon, I think we're expecting some increase in revenue. And also we'll -- introducing new rider to those main policies, so that is also incorporated in bullish the auto insurance since this is a good opportunity, but you also refer to the auto -- retail, auto bill insurance in collaboration with Toyota. Outside of Japan, working with the dealers of Toyota Motor Corporation, we are engaged in the retail business, the auto bill and the COVID costs and decrease there. But after that, we've been able to increase the sales. And also, as I mentioned earlier, the telematics know-how is now deployed to various comes. So in those fronts, we've been able to grow sales quite steadily -- and profit has been accumulated and also the traffic volume has recovered after COVID-19. So we have seen some volatility there in a fluctuation therein. But steadily, we have been growing the revenue from auto insurance in collaboration with Toyota. So including those business deployed outside of Japan, as far as auto bill insurance is concerned, it is the area in line that we would like to further grow further, and I hope you understand our stance there.

So from Mizuho Securities, Sato-san, you've been waiting a long time.

Sato from Mizuho Securities. I'm sorry, I'd like to ask 1 question earlier, the improvement of capital efficiency when it becomes necessary, then you'll study the additional return. Actually, I think that's difficult to put into practice, for example, let's say, profits come down recently, you have a V-shaped recovery in many cases. And this new definition for ROE and also the strategic equity holdings and after IFRS is induced, maybe the capital volume will differ. I'm sorry, the introduction is long. So when you talk about the need for capital efficiency, how are you going to judge that when you come up with the basic guidance for the next year and, let's say, the ROE of 10% that cannot be met, then -- well, specifically, what are the cases that do envision.

Thank you very much. So improvement of capital efficiency, judging that, what is the timing? And what is -- how are we to [Judge that , Higuchi-san] please.

Well, you seem to concentrate the questions on this 1 point, although a number of points are listed. So this is just kind of a rule of thumb. And so whether this is implemented or not, will be judged from various perspectives. We're just showing some examples. And [indiscernible] also asked earlier about this. And whether this is done or not is going to be considered each year. Now -- so you gave the example about the beginning of your guidance. And let's say that the results are greatly lower than the guidance. Then additional return, are we going to consider that? Yes, we will consider that. But on such an occasion, It's not going to be done mechanically, as explained earlier. It's as Well, in terms of what you just missed, the case that you just mentioned, yes, that will be part of the study. And I think people concentrate on this because it is material that a third party can check and that's not so numerous. So that's why. Thank you.

Next person to have their hands up in the Zoom, so those 2 will be the last one. [Morgan Stanley] securities, please.

One question. In the case of Amlin, once again, the plan indicates that Amlin is going to improve its profit, but it's been constantly booking losses. There was a year in which a very small profit was made in the case of the Lloyd's companies, those companies do take natural catastrophe, but his [ stock ] or others in [ Bali ] and other peers in the Lloyd's market. Those companies are not consistently booking losses year after year. So going forward, the natural catastrophe risk, you mentioned will continue to be reduced, and you also share -- you haven't shared with us the target for that. So somewhere, unless the company really achieved those improvement and improvement cannot be realized. Somewhere the decision must be made juristically to reduce the catastrophe risk underwriting. Going back in the past, this medium-term plan covers a long period of time. So the natural catastrophe risk to be reduced by 30% or 40%. And if that happens and to what extent the ESR is improved. Somewhere, I would like you to share with us as such. Thank you very much.

In the case of Amlin, the natural catastrophe risk. To what extent, we are going to reduce that you would like to know the size of [indiscernible] will respond to that question.

Thank you. It is fully recognized that the natural catastrophe risks that needs to be reduced. And even in the current fiscal year, targeting a 20% reduction from the previous year, the efforts are made in June, July period, the renewal of a U.S. natural catastrophe risk coverage will be made and also there will be a bit opportunity to reduce natural catastrophe risk. And at the same time, in the case of AUL operating in Lloyd's market on Page 35. As you looked at that pace, especially on the right-hand side of that page, the portfolio of non-cat risk shows substantial improvement. That's the current status. At the AUL, the inward reinsurance is over 40%. And of that, a further 40% relates to the inward reinsurance in natural catastrophe and we'll further reduce that below that level. And to absorb that, the profitability and earnings power of noncash risk underwriting has improved. And the mix of different lines of the existing portfolio has improved significantly, and we have been reducing top line in that process. There are some high-quality policies that have been reduced because of the fact that we have been trying to reduce the portfolio overall. So we are now in the process of trying to reestablish the relationship with those goods positive crisis. So especially in the marine and energy areas are taking advantage of the [parting] market environment, we want to underwrite those risks. And by enhancing the fundamental earnings power, we are trying to absorb natural catastrophe. Well, reducing those risk taking where that is necessary. And with addition 30% or 40% reduction is achieved, we have not yet simulated what would be the impact on [indiscernible] . But the capital efficiency at AUL from the viewpoint of capital versus risk, there is no problem that has been identified and capital investors thus far can be used for the dividend payment in the future environment. And therefore, there is no issue in terms of the ESR.

This will be the final question from Nomura Securities. Sakamaki-san, please.

Sakamaki of Nomura Securities speaking. I know it's late. I'd like to ask just 1 question. Page 42, there is a bubble chart of the business management sophistication. And what businesses at this point in time are you assuming to review. And when you make this review, how are you going to make the adjustment? And what is the time horizon in which you will make the adjustment financial institutions are not only expanding but also reducing their businesses. I believe that it is the trend of management to make such clear distinctions. So I would like to ask the intentions of management about this.

You're referring to Page 42, business management. What will be the criteria and timing for the review. [ Higuchi-san ] will give the explanation.

There are a number of circles on the graph. What will be part of the review will be the businesses where ROE or ROR are not sufficiently attained. So the issues of such businesses will be clarified and measures will be taken. But this improvement cannot be foreseen, then they will become part of the review. Already from the previous fiscal year, we have started this kind of business management and a number of businesses are under review. However, I cannot go into specifics as to which businesses are under review since that would affect the motivation of the parties involved. However, for a number of businesses, they are under review. And going forward, we would like to have a study, including the possibilities for exit. Did that answer your question?

Yes, it did.

So we would like to close the Q&A here. And if there are questions that we could not take up, then IR department will be happy to answer them. So for MS&AD Insurance Holdings, first -- fiscal 2022 first information meeting will come to a close. Thank you for your participation today.