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

Good afternoon, ladies and gentlemen. Thank you very much for participating in the MS&AD Insurance Group Holdings Fiscal Year 2025 Second Information Meeting today. I am Hayashi from the IR department, and I will serve as a host and moderator. Thank you for your attention. Before we begin, I'd like to provide guidance regarding the audio and materials. The original audio will be in Japanese. [Operator Instructions] Today's materials are available on our official website. Please select Investor Relations and IR Events from the top screen and view the section Fiscal Year 2025 Second Information Meeting. Also, I would like to apologize and inform you about correction to the materials. We have added 2 details in the latest version of the materials published on the official website this afternoon. The revised version has been distributed to those participating in the venue and the materials currently on the official website for those participating online are the correct ones. So please check them. The first correction is on Page 21, where information about the revision planned for January 2026 has been added to the graph on the left side for voluntary automobile insurance. The second correction is on Page 20-22, where the expression, introduction and operation of early retirement support system has been added to the personnel cost section within the box on the right side. Now I'd like to introduce our attendees. President and Group CEO; Shinichiro Funabiki. Next, from the left, Executive Officer in charge of Asset Management and Financial Services business, Takuma Hayakawa; Senior Executive Officer and Group CRO, Satoru Tamura; Vice President, Executive Officer and Group CFO, Shigeo Kudo; Executive Officer in charge of International Business Planning Department, Hironori Morimoto. Today, first, we'll have a presentation by President, Funabiki, for about 15 to 20 minutes based on the materials. For questions, we will have a Q&A session for approximately 60 minutes following the presentation ending around 5:30 p.m. Now let's move on to the presentation. Mr. Funabiki, the floor is yours.

Hello, everyone. My name is Funabiki. I'm the CEO of MS&AD Holdings. Today -- So this year, so we have announced the merger of MS&AD and also we have made a release on our investment into W.R. Berkley. And quite recently, so we have made a release on our investment to Barings. So quite a number of significant events for the group. So through these initiatives, I'm going to show you, through these initiatives, how would the group look like in the future, especially by the end of 2029, we are going to complete the unwinding of strategic shareholdings. I would like to focus my point on that point today. Please take a look at Page 4. So as announced in the news release at the end of September, the 2 core non-life insurance companies will merge in April 2027 to become Mitsui Sumitomo Aioi Insurance. At the same time, the group name will be changed to Mitsui Sumitomo Insurance Group from the current name, MS&AD Insurance Holdings. So the Holdings will change its name as well. And so the group brand will be this kind of green and the letter, the character would be white. So these are our corporate color. Quantitative target. So after any sell-down of cross shareholding, we would like to keep the same level of the profit. Right now, we are using group adjusted profit. So we want to retain or maintain over JPY 700 billion adjusted profit in 2030, after we have completely sold down strategic shareholdings. We are reborn as new group. So -- and the tagline -- the new tagline that represents our management philosophy and style Is taking on risk, leading the world. So we have focused -- we will focus on serving the mission as an insurance company. And we will be the most chosen, the top choice insurance group, both in Japan and globally. So that's what we have embodied in the tagline. And we have a concept video which talks about this new corporate philosophy. [Presentation]

So we wanted to show our determination in this video. Now please take a look at Page 7. So as an approach to realizing the profit target for the fiscal year 2030, we have been discussing management plans and KPIs internally among the management members. In the first information meeting in May, I said that we would formulate a 3-year medium-term management plan starting from the fiscal year 2027 after the non-life insurance merger. Having said that, we have decided not to formulate a so-called medium-term management plan going forward. The reason is that rapid changes in internal environment, including and especially the merger and external environments such as regulations and industry rules are expected. So it has rapidly changed, and it is going to continue to change rapidly. So we believe that making swift and flexible management decisions while looking towards the fiscal year 2030 and accumulating single year plans will ultimately increase the certainty of achieving the fiscal year 2030 targets. Of course, we will present I mean our -- I guess, the big picture of how we are going to get and achieve 2030 targets. So in the future, so we will focus on single year plan to make a flexible and swift decision-making, and we need to reflect that -- continue to reflect that onto our plan and present that to you, the investors. So that's our focus. So additionally, our KPIs will be reviewed with the introduction of IFRS at the end of this fiscal year. Adjusted profit and adjusted ROE will not undergo significant changes in their fundamental concepts compared to the current J-GAAP basis despite accounting standard differences. Definitions of these are provided on Page 8, but the detailed explanation will be presented at the IFRS introduction briefing scheduled on December 17. Plus, we have decided to add EPS growth rate as a new KPI. We will further enhance our awareness of maximizing corporate value and capital efficiency while conducting business operations. So again, that's a commitment that I'd like to make to all of you. The EPS from core business, excluding the gain from strategic equity holdings sell-down is projected to grow approximately 17% between fiscal year 2026 and fiscal year 2030. There are also changes regarding ESR, which I will be talking about that later on Page 13. So regarding the profit outlook towards fiscal year 2030, Page 9 shows the current group adjusted profit base and Page 10 shows the number in terms of IFRS after we have adopted IFRS. As you can see, there is no significant difference in the numbers in these 2 pages. In either case, by 2030, so driven by both in domestic non-life insurance and international business, we are very much confident that we can get to JPY 700 billion adjusted profit. The profit growth rate, excluding strategic equity holdings sell-down is expected to be around 15%. Sales of strategic equity holdings, decisions will be made comprehensively considering the market environment and merger cost situations. But given the current share market situation, I think there's a good possibility that we can expedite the process of front load, the completion of the strategic share sell-down. Page 11 summarizes the structure for achieving the fiscal year 2030 profit of JPY 700 billion and efforts towards reaching JPY 1 trillion. The 3 major topics or initiatives. I will explain shortly. So again, so the cost reduction, cost synergy after MS&AD integration, JPY 150 billion upside. Synergy through partnership with W.R. Berkley, we are expecting JPY 100 billion contribution. And our investment into Barings, we are expecting additional profit of JPY 75 billion. So they add up to JPY 3,250 billion. And I mean, these 3 factors alone has this much contribution. So we are confident that we can achieve JPY 300 billion. And of course, there are contributions from other initiatives as well. Moving on, please turn to Page 12. So our track record and future outlook for both EPS and DPS. So we have achieved over 15% growth in EPS historically. And moving towards fiscal year 2030, we are expecting to expedite the growth. I mean so including the control of number of shares outstanding. Now if you look at EPS, by the end of this fiscal year, we had 13 consecutive years increase in dividend. So, I mean, so we will focus on highest dividend as the highest value, best means of providing returns to our shareholders. Page 13. So after the introduction of IFRS, there will be no changes in the basic return policies such as maintaining a total return ratio of 50% and adopting progressive increase in the dividend as a principle. However, we decided to remove the upper limit of ESR. So, I mean, there is going to be some change in how we provide guideline to providing additional shareholders. So that's explained on Page 14. So as mentioned earlier, so the gain from strategic shareholding -- selling of strategic shareholding, we would like to appropriate that, use that money on investment for further growth. So we used to have 250% cap on the ESR, but with the investment into W.R. Berkley and Barings, I think we have completed a round of investment for growth. So how are we going to perceive 250%? Or are we going to bring that down to 220%? So there's going to be a lot of changes, I mean, in the market or in the regulation. So bringing -- I mean, adjusting up and down the upper limit to 250% or 220%, is it really the best approach. So I mean, so ESR is a KPI that represents the soundness of our financials, yes. So in that sense, we are going to continue to hold the floor 180%. And so it has served as sort of a guideline or the threshold for additional investor return. So we will need to be creative in how we communicate this well to investors. So of course, I mean, we will be very flexible in managing our capital allocation. And with that, so if you can take a look at Page 16 or 14 on the right side. So it shows the framework of our shareholder return. So we are going to draw a line, so that you could have a pretty good idea on when and how much we are going to provide return to our shareholders. So I mean so we have, for instance, I mean, appropriated the proceeds from Challenger sell-down and appropriated that to shareholder return. So we did remove the upper limit, but we have not changed ourselves in providing proactive return to our shareholders. Please turn to Page 15. I'd like to talk about the situation around strategic shareholder holdings sell-down. So in the first half, it has progressed quite solidly, but Nikkei average has significantly spiked since end of March. So we have worked down the balance through the sell-down. But on a market cap basis, I mean, the balance has shown a flat decline remaining at JPY 2.3 trillion because of the valuation enhancement. So if you look into the decision, so we are going to enjoy more capital gain in the future. So that's a virtue, but we have this much balance. So we need to look into the market, our cost of PMI measure. We will need to determine the pace of the future sell-down of strategic shareholder -- shareholding. And we are going to reflect that to next fiscal year's plan. Now please take a look at Page 16. So our investment for growth, like I mentioned, so we have invested into W.R. Berkley, and we have invested into Barings. So that's completion of a round of significant business investment. So now I mean, we are going into a phase where we will be harvesting the fruit of these big investments. Of course, in order for us to continuously grow the business, we need to continuously look for this type of opportunity. So we are going to see the balance of investment and return and in light of further meeting expectation of our investors and shareholders. Now I would like to discuss the concrete actions for each business to achieve profit targets for year 2030. Regarding domestic P&C business, you can find the time line for the merger in Page 18. Regarding growth strategy after the merger of the 2 companies, you can find from Page 19 onwards. Upon merger, generally speaking, risk factors are set to be system integration. But for our group, in integrating system, right and smooth integration approach was defined in terms of the capacity. We set a very clear capacity. And within that capacity, the system can be managed. The business divisions are in alignment about this, so that we have confidence to be successful. The next page -- there are several major changes that we expect to see happen in domestic P&C business. There are mainly 3 of them. First customer-oriented operation of duties, which is enhanced comparative recommendation sales. This is an important factor to affect the model of our business. And in the commercial line, there would be evolution of the transitional measures for the designated contract ratio. And this is going to bring a major change in running a business, which has been oriented in agency channels or in-house agency channels. So this is going to bring a significant change. Of course, big premises are that right marketing and production structure has been established for the customers. So together with the agencies, right operations must be implemented by setting up the right structure. This is a very important focus that we are going to make. In this context, insurance companies and agencies have to restructure ourselves and [ bridging ] ourselves. This is going to be a very important theme for this year and next year. So how to manage risk and how to deliver products that are going to meet the expectation and needs of our customers. This is going to be the refocus areas for us. One typical example is shown here, bank agency and our own direct agency are to be merged to set up a joint venture so that we are going to keep the level that are expected by our commercial clients. So this is one of the efforts that we pursue most recently. And then on Slide 21, this slide talks about auto and fire profitability improvement and also the rate revisions for that purpose. In both lines of business, for auto in a short-term cycle, 95% combined ratio. For fire, in the conventional setting, in 10-year major cuts, how we can absorb such losses to come up with 95% combined ratio. So those are the key factors to design pricing conventionally. But unfortunately, today, those levels are not met yet. Therefore, expense reduction is where we put our utmost effort whilst we also continue to revise and adjust our premium rate, which we have been done and which we are going to do. More specifically, both in auto and fire, we need to reflect inflation and also more frequent and more intensified NatCats. And based on adviser rates, we are going to also set up our own projection of the market so that we would be proactively revising our premium rates. As a result of those endeavors, right now, combined ratios are improving, but we need to continue to make revisions until we reach the most appropriate levels, mostly driven by the rate revisions. Page 22 talks about our outlook for expense ratio. By fiscal year 2030, we expect to reduce personnel expenses, agency commissions and non-personnel expenses by JPY 50 billion, respectively. In terms of expense allocation, it's quite comparable to this portfolio. So just proportionately, we expect such reduction benefits. Starting on personnel expenses, MS&AD together after merger, there would be a total of about 34,000 employees. And within our group, it's skewed more toward a high age population of employees. Therefore, by 2030, as a result of natural attrition and as a result of merger, restricted or restrained hiring would lead to the total number of employees to be under 30,000 by year 2030. Then by offering a variety of options to our employees, we are going to make sure that our employees are going to be able to make the best choice for them by way of providing early retirement support system. So all in all, we have certainty about hitting the target of the total number of employees under 30,000 and also reduce the cost by JPY 50 billion. And then we expect the same level of reduction from agency commissions and also non-personnel expenses. Regarding non-personnel expenses, system development operation costs are key drivers. But by benefit of merger, we expect significant reduction in non-personnel expenses so that in fiscal year 2030, we expect expense ratio to be well under 30% for -- with good visibility. Our target rate of expense ratio is 29.6% in FY 2030. Then, I want to move my attention to international business. Please see Page 23. International business is a major driver to drive our growth. And in FY 2030, we expect group adjusted profit of JPY 420 billion to be generated from International business. We have confidence about this projection backed by the turnaround of Amlin. As for Amlin entities, they are directly to MSI for the purpose of enhancing governance. Then we assigned the leader who has experience as CEO to become CEOs of Amlin companies so that we were able to secure talent. And also as a result of this leadership team, we are able to enhance a disciplined underwriting such as cycle management to deliver strong results. So we are very proud of this achievement that we have so far accomplished and insight and capabilities that we have earned are reflected in our American business, where we started to expand local business in earnest and put the American business on track for the growth, as you can find here. Then now we have alliance and partnership with the founding family of W.R. Berkley that has excellent and also outstanding underwriting capabilities. And we were able to actually achieve this partnership based on insight and capabilities that have been accumulated. So we have a good confidence about achieving JPY 420 billion hurdle that we set. And now I want to talk more about this partnership with the W.R. Berkley funding family. So I talked about JPY 100 billion target profit. But for us, of course, after enjoying the equity gains, the Berkley's profitable portfolio and also reinsurance transaction is where we want to take priority for underwriting. And then within our group, we have production bases in Japan and Asia that can be leveraged to introduce W.R. Berkley's underwriting resources and also expand specialty insurance market in those regions so that can lead to a growth in our profit. In America, as a foreign non-life player, our ambition is to become one of the top tier players. Upon this, together with the founding family of W.R.Berkley by joining business together. And through the collaboration work with them, we are going to build up our trust-based relationship. And as a result of that, we are going to see new prospects and also options to be taken by the 2 companies. And more than anything, our track record from our activities and by collaborating with W.R. Berkley, I'm sure that W.R. Berkley is going to have more -- find more value and trust on us, and that should be beneficial in a mutual and reciprocal manner going forward. Then on Page 25, there is an explanation about the governance that we are going to establish to manage our international business. In managing the international businesses, upon merger of MS&AD, the International business structure is going to be led by the holding company. And as a holding company, we will be promoting a multinational talent so that we are going to be sophisticating ourselves as a global holding company. So with this enhancement of the organization structure, we are going to expand underwriting culture and also capital allocation, strategic planning and risk management. We make sure that this strategy and practice are going to be expanded across our regions in a very effective manner. And so that there would be even higher visibility in hitting the profit target and enhancing our risk management capabilities. My next topic is on Page 26, regarding asset management. There are some changes in our environment and the key challenges that we face today. And that is concerning our growing International business and also another focus business with life insurance and the challenge is to enhance product competitiveness and also enhance capital efficiency. Even until now, we have been enhancing our operational structure in a global scale. But in order to address those challenges that I just mentioned, we have made a decision to invest in the Barings, which is 100% subsidiary of MassMutual, which is a major player in the U.S. and pursue partnership. In addition to that, research to capitalize on Martello Re, which has a very deep relationship with MassMutual and the Barings. As a result, as you can find, we can enhance our operation of foreign credits and enhance product competitiveness for life insurance and also sophisticate our risk control capabilities. So those focus areas that we would like to enhance are going to be enhanced as a result of this investment. And this is a conceptual chart of the objective and the goal of this investment and partnership, as you can find in Page 27. Barings has a very strong operational capability and management capability to manage public and private credits according to our own assessment. And affiliate company, Martello Re, is a insurance company with a very strong credit worthiness. As you can find in this slide, by investing in Barings and also by allocating capital by way of seed capital investment and investment mandate, we are able to enjoy high dividend and a stable investment management return. And also by making use of reinsurance, we are able to control risk in an appropriate manner. So this is a structure which enables the capital cycle management, which is part of our management strategy. As a result of that, on Page 28, you can find the expected earnings. As a result of this partnership with Barings, we expect the total earnings is going to amount JPY 140 billion. And the additional earnings, which would not have been achieved without this partnership is estimated to be JPY 75 billion. Finally, I want to talk about shareholder returns based on the recent half year results. Please see Slide 33. Our interim dividend is JPY 77.5, which is JPY 5 increase year-over-year. And our estimate and guidance for full year dividend is JPY 155, which is JPY 10 increase year-over-year. Regarding share buyback, the basic return is JPY 75 billion. And in addition, the additional return, which is covered by the capital gains from Challenger is JPY 60 billion. As a result, by adding JPY 85 billion from year-end fiscal 2024, the amount of buyback in fiscal '25 is going to be JPY 220 billion. In May meeting, our guidance was JPY 200 billion, but as a result of upward revision of the full year guidance, now it's JPY 20 billion higher by original guidance. This concludes my presentation. And I will -- and we are going to continue to drive our growth and also shareholder return to meet the expectation of the shareholders and our investors. Thank you very much for your kind attention.

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

This is Watanabe speaking from Daiwa Securities. So I have 2 questions. First, so Page 7 of the presentation, so EPS growth. So you mentioned 16.8%, excluding the gains from strategic shareholding sell-downs. So can we expect increase in EPS for the single year? And 13.7% growth rate, which you have made. So what is the reason for 3.1% gap? Is it because of the deduction in number of outstanding share because of share buyback? And so Page 14, so capital allocation. So you talked about ESR capital policy. So you have talked about removing the upper limit. So if you are over X percent, sorry, the audio went off. So what is your thought on additional -- what level of ESR to start providing additional returns to the shareholders?

The first question, the numbers. So focusing on Page 20-30, our plan that we have presented. So we are going to have an incremental growth and sell-down of strategic shareholding. So I mean that it's going to fluctuate because of the market. So there is going to be some ups and down. So -- and if you look at our overseas business, so we will start seeing the fruit of the investment, not in a straight line, but more -- I mean the speed with growth towards the later years. So probably towards the end of the years until 2030, we are going to see the growth pace pick up -- speed up. And so I will answer the second part of your question. So like you have pointed out, so the share buyback will be -- yes, it is a very big factor, which is going to reduce the number of outstanding shares for our group.

So yes, he answered the question. So [ 250 ] -- so that was -- we were thinking of the investment into W.R.Berkley and Barings. So of course, we are going to flexibly capture these opportunities. But until -- so we are going to be effected to our capital structure. So we need to start focusing on that. So -- but ESR, if you just focus on ESR, so it is coming down. So we need to look into what is the optimal standard from which we can start, I mean, implementing share buyback. So we are finalizing the decision. So the started line, I mean, on the left side comes down on the right side. So that's the implication. So that's, I guess, our decision. Thank you very much.

Muraki from SMBC Nikko Securities.

I'm Muraki from SMBC Nikko. I have 2 questions. First question is on ESR. September 8, 234%. And on Page 16, so you are done with major investment cycle and you have determined where to allocate capital elsewhere, roughly speaking. So all in all, what would be the pro forma ESR based on all those factors included? And W.R.Berkley and Barings together 15 to 20 points, then it would probably bring it down to 220%, then JPY 2.3 trillion is not going to go down to 0. Then JPY 0.8 trillion for pure investment and JPY 350 billion. So net basis, I think there would be a less management risk. So all in all, what would have been the ESR level? That's my first question. And my second question is regarding domestic business. Within the presentation, in 1 to 2 years' time, the key topics are going to be evolution of competitive recommendation sales and also the distribution channel transformation, which is today driven by agencies. But at the same time, in the next 1 year, you need to work on the merger of 2 commodities. So you have 2 major tasks to conduct simultaneously. So today, what do you think are the barriers or difficulties or challenges in pursuit of those 2 major tasks? Then what would be the potential after completing those major tasks?

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

Fine with the first question. Regarding this first point, then maybe you cannot tell me, but investments in W.R.Berkley, if you have already made progress, then that should have been reflected in ESR as of September 8, but the gap is to 20 points. And regarding the investment side, am I correct? You reduced Japanese equities quite substantially, then JPY 350 billion increase in the credit investment, then investment risk is going to be lower. Is this correct understanding?

Thank you. Regarding the W.R. Berkley, I cannot give you much details today, but we have been making progress regarding investing in it. So that is partly accounted for. And regarding the second point on asset management side, investment side, overall understanding that you gave me is correct. But in asset management, there are many investments, not substantially large risk, but there are foreign exchange rate risks, then we invest overseas as well. So within our current estimation, all inclusive of the elements, the level that we expect in ESR is the one that I just told you. Regarding W.R. Berkley, as you said, as we acquire foreign equities, for half year, it's down by several points. And after investment is complete, goodwill is going to be recognized. And that means that there will be further reduction in ESR as of end of the year. I cannot give you a specific figure now, but it's going to be slightly over 200%. Regarding the second point, simultaneous 2 tasks, both the merger and regulation -- regulatory affairs, we are merging 2 companies which are already part of our group. It's different from a pure merger of the 2 companies of which capital base is different. So I think the burden is lighter compared to such a more conventional merger. The system is where the management of risk is more important. As I explained earlier. But aside from that, we know each other already between the 2 companies, and we visit each other's offices, and we see a very similar product lines. So compared to a conventional merger of 2 strangers, I think we are in a more fortunate position to pursue merger. And regarding the change of the regulatory rules, of course, there are some preparation to be made at head office, but the front line, the employees working at front lines have to do the most of the work. And we want to minimize the burden on those frontline employees concerning the merger. So more strict the comparative sales. And regarding the abolishment of the intermediate measures with or without the merger, we have enough time and resources to work on those regulatory changes. And as we are going to be larger in size, both in qualitative and quantitative manners, we are now stepping up to a more advantageous position. So this merger is more of a tailwind for us. And even where the changes are required in the regulatory environment, I think it's possible to pursue a strong approach. So the benefit of merger, in our view, is greater than the burden and the workload that we have to bear. And as a result, that is going to create even greater value to customers. So this kind of purchase cycle is we are achieving now.

Next question from JPMorgan, Sato-san.

This is Sato speaking from JPMorgan. I have 2 questions as well. One, Page 11. So the factors driving profit increase up until 2030. So that's what this slide is presenting. So if this convinces the market, your share price will surely go up. So in order for us to really enhance the conviction, so the 2 upside from the over 2 overseas investment, I would like you to elaborate on how we are going to get to these numbers. So we have made altogether JPY 800 billion investor and 20% -- over 20% return after 5 years. So Tokio Marine, I think the other day in their IR presentation -- in their presentation, they had -- they present a similar return for their overseas investment. So they have done 5 M&A altogether, 22% aggregate. So your company is expecting very high return compared to that in 5 years. So what is the ground for doing that? So what is the -- I guess, what is the differentiation that you have that is going to achieve such high level of growth? Can you elaborate on that point? So that's my first question. Second question is on Page 15. So the future unwinding of the strategic shareholding. On the right side, so you talk about -- so you have the stability of adjusted profit and stock market conditions, and that's how you're going to determine the pace, page 15 and expected cost of integration. So March '26, so you're going to have a balance of [ JPY 2.1 trillion ] of which JPY 100 billion -- JPY 800 billion is pure investment. So if you're going to leave that amount, so probably -- so you have to further unwind JPY 1.3 trillion over 4 years. So that will be JPY 300 billion a year if we make the division. So next fiscal year, I mean if I do the math, so we are going to have quite a reduction in the amount of unwinding you're going to do. So are you going to have -- so if you can realize profit, so are we going to -- so is this -- are you saying stability of adjusted profit in a sense to normalize the pace of unwinding? So because you have been focusing on whatever you can sell early and you have been selling. So probably, as you go down the process, there are a lot of shares for which unwinding and negotiating for unwinding is very difficult. Given that situation, is it further going to contribute to stability of adjusted profit? Is it possible for you to keep the pace of unwinding?

The first point, Page 11. So the structure for achieving -- so the probability or I guess, how realistic these I mean, numbers upsides are. Cost reduction, like I have mentioned earlier, we have a very solid outlook for achieving this much cost reduction, the first point. So the partnership and synergy with W.R. Berkley. So we have experience in recovering MS Amlin. And so we have experience in solidly growing MS&AD in U.S.A. So why we were able to do that? So we have people, talent. And so we are leveraging the talent in the -- our strategy. So people, so underwriting capability of our people which meets our risk appetite. So we were able to recruit the right underwriters, talented right underwriters. And these talents, so the market cycle, so going soft, going hard. So the CEO needs to recruit the right underwriter team that meets the situation. We have successfully -- we have successfully done that. That's why we are recovering these businesses. So looking into this market cycle, so there are concepts for underwriting. So a partnership between W.R. Berkley and MSIG is very -- will be very strong because we have very similar concept and philosophy. So we don't have to start from understanding each other. So we have had a negotiation for a few years. We have a very deep understanding -- mutual understanding. So that's why we can start right away. So how we can make development in Asia. We already are on the same page. So we talked about reinsurance. So if you start from confirming risk appetite, so I mean, how much we can underwrite, how much we can profit, we don't have -- we are not on the same page. But us and W.R. Berkley are already on the same page in regards to such goal. So additional expected return from investment into Barings. So what is -- so what is the differentiator, which allows us to achieve the growth higher than our peers? So because we have MS Primary in our group, and we have been managing MS Primary, that I mean matches the structure, and it's easier for us to gain results. So high operating productivity, we can reflect that onto our rate price, so we can offer a more competitive product from the pricing perspective. So that's a virtuous cycle that we enjoy. So this is something that only MS&AD are capable of doing among all the Japanese insurance companies. And do you have anything to add? So -- and strategic shareholders. So up until 2029, we want to stabilize our adjusted profit. And in order for us to achieve progressive increase in dividend. So what should be the timing of unwinding, what brand or which share do you want to release? I mean we have story and scenario for designing that. And now we have a merger, which is a costly initiative. And so -- and given the relatively high, I mean, share price average. So these are the moving factors, which would determine our tactics or strategy for further unwinding. So if you look at this fiscal year's profit, and let's say, so what is the profit of evenly distributing the unwinding to the remaining fiscal years. So having more percentage of share being unwinded next year, yes, maybe we would probably opt to do that. And -- but by doing so, we will need to prevent fluctuation in our bottom line. So we have been negotiating with the issuers of our strategic shareholders, and we want to, I guess, continue to achieve the result based on our communication with the issuers of our current strategic shareholders. Thank you very much, Sato-san.

So next Takemura from Morgan Stanley.

I'm Takemura from Morgan Stanley MUFG. My question concern numbers. I know that you're going to have a different session in IFRS, but I have some questions that I wanted to ask this time. One of them is IFRS profit and JGAAP profit levels have some difference. So how should I be thinking about them? So on Slide 9 and 10, if you make a comparison, roughly very similar levels. In the previous explanation policy and also market valuation of liabilities a difference of JPY 100 billion. So how would you explain that? And together, on the second point, regarding IFRS basis, current ROE is going to be what level? I would like to have some image about this. And for example, IFRS basis adjusted net asset level and also from this adjusted net asset value, you also subtract intangible asset. So I'd like to see the size of it, roughly speaking. So my question in a nutshell is the level of ROE.

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

First of all, regarding this difference, JPY 100 billion, as you mentioned, for P&C side, the difference is mostly these onerous policies. And then regarding Life side, as possible, the gains from strategic equity sales were adjusted. And on the cash, we also wanted to make it a cash basis. So for the new business for life, the impact is pretty large, but we made some adjustment on this so that as we compared to the previous explanation, there has been some compression. IFRS basis adjusted profit current ROE, the number I have is that [ 13.5% ] outlook for FY '25 end. And in compared to year '30 -- fiscal year 2030, probably liabilities calculation would increase the net asset in the future. But I don't have denominator numerator at hand. So I would like to explain it in a different occasion. Then regarding the difference, one big factor is we adjust and exclude the market fluctuation factor to see consistency. Maybe not directly related to your question, but ROE that is on Page 9, 14.9% and Page 10, 12.4%. Those are JPY 700 billion profit is based on our confidence to achieve. And based on this confidence, we came up with this number. So this is not stretched the upper end numbers, but this is the minimum number that we are to see.

Next from UBS, Niwa-san.

This is Niwa speaking from UBS Securities. So the profit until 2030, the profit and ROE and the overseas strategy, I have a strategy on your -- I have a question on your overseas strategy. So I'm trying to -- yes, really understand Page 10 and Page 11. So given your comment, so IFRS space, so JPY 760 billion is, I mean, very solid target, very probable target. But -- so ROE of 12%, 13%, I think that's not a very high bar you're setting. It's a bit low. So I mean, what's the distance between JPY 1 trillion and JPY 700 billion? So if you can give us the color, probably that would give us a better understanding. So are we talking about excessive capital which is assumption behind ROE? Or I mean are you aiming for upside? So what's the color here on your ROE target? And the second question is on Page 24. So your target for overseas business. So in U.S. market, you want to be a top-tier foreign affiliated non-life insurance. I'm having a difficulty, I guess, understanding that concept. So are you going to -- I mean taking all of the returns from investors or investment? Well it's not a specialty insurance that you'll be going for. You're going widely on commercial insurance. Are you going to -- is your underwriting appetite like that? So I think this is -- this seems to me like a very big ambition. So what is your idea on the strategy for your overseas business?

Your first question, so ROE target setting. So our adjusted profit target, which is -- we are very confident, so JPY 764 billion. So ROE, assuming JPY 764 billion adjusted profit is 12.4%. So again, I said our focus is more on JPY 764 billion. So if you automatically calculate our ROE from that level of adjusted profit, it's 12.4%. So I mean, how are we going to drive our management effort to further, I mean, boost or enhance ROE. So that will be our fine-tuning of our business plan from next fiscal year onward, how far we can go. 12.4% -- so it's like an accessory figure from JPY 764 billion. It's an automatic calculation from JPY 764 billion. So we will need to look at the equation, both the denominator and numerators, of course, I mean design different initiatives that you can see in the future. Now so overseas -- in overseas, I mean, we want to be top-tier foreign nonlife insurer. Morimoto-san can further talk about this. So we have been focusing on business with Japanese clients, Japanese JIA. And so that's the past. So building on insight from Amlin, so we have explored into commercial insurance in U.S. So we are now widely approaching commercial. And also, we are focused -- also focused on specialty insurance, alternative transaction like transfers. So we have multifaceted growth in the United States. So in commercial insurance, we want to really build a strong presence as commercial insurer in the United States. And so the retail that I think you have talked about, do we have any bridgehead for retail insurance? We are not looking into that possibility. So we want to, I mean, yes, enhance our presence in commercial insurance. Morimoto-san, can you further elaborate on that point?

Okay. Thank you very much. So could we turn to Page 49. So on the right side, we have 3 pillars of our businesses in Americas. So we have been MSIG USA, which has over 50 years of history in operation. So we are shifting our focus more from JIA to open market. So -- and we want to focus on specialty area. MS transfers, so we -- the company is completing its third year. So it's MHI, it's a niche area, but we are minimizing the risk taking, and we are more focused on fee income. So we also differentiation building on the credit rating. So these 2 are 2 pillars of growth in our current operation. So I mean, we are not looking into, for instance, retail insurance like automotive insurance. So Berkley, so we have talked about that in Page 24 as well. So it's not just equity method profit that we are expecting. So we can drive reinsurance business between us and Berkley, and we can grow the businesses outside the U.S. So that's our perception. So in U.S., so I mean, going into U.S. market from outside U.S. So there are very few companies who has -- I mean, came into U.S. from outside and made a success. But we are very committed to the U.S. market. And so -- and especially we are driving strong growth in MSIG USA, we are being accepted by the market. So we have -- so the U.S. insurance market is JPY 140 trillion. I mean that offers a stronger, larger growth potential. So conventionally, we have been focusing on Japanese clients, JI channel. So we were not able to build our network nationwide across U.S. So we are doing that. So we are eyeing on -- we have initiatives to enlarge our distribution network widely across America. So MSIG USA, MS Transfers, so given the floating, I mean, so it's like their size is like JPY 300 billion. Berkley, so they underwrite some reinsurance as well. And the premium of reinsurance, if you look into -- if you add everything together, so we have close to JPY 1 trillion. So I think our scale in the U.S. is growing. Of course, I mean, U.S. is much larger than the Japanese market. So given -- if we look at the market share, we are still small, but we are growing the scale, size of our business. And in that sense, we have governance, risk management, risk appetite. So I think like our U.S. peers. And I think we are ready to do that, and we are very mindful of that.