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

Good afternoon, investors. Thank you very much for joining the MS&AD Insurance Group Holdings, Inc. Fiscal Year 2026 First Information Meeting. I am Hayashi from the IR Department, and I will serve as the moderator today. Thank you for your cooperation. Before we begin, I would like to provide some information regarding audio and presentation materials. The original audio will be in Japanese. Webinar participants may listen in English by using the interpretation function. Please select English from the interpretation button on zoom. Today's presentation materials are available on our official website. From the top page, please select Investor Relations and then IR Events and refer to the section titled Fiscal Year 2026 First Information Meeting. First, Funabiki, President and Group CEO, will give a presentation based on the materials for approximately 20 minutes. Following the presentation, we'll have approximately 60 minutes for Q&A. The meeting is scheduled to conclude at 5:30 p.m. Now let us move on to the presentation. Mr. Funabiki, please begin.

Hello, everyone. Am I coming through?

Yes.

This is Funabiki from MS&AD Holdings. Let me explain our group's future growth strategy and capital policy. First, please look at Page 4. Since last year, we have announced the merger of MSI and ADI, the name of the new merged company, its executive structure and tagline. And we have also invested in W.R. Berkley and Barings. So today, I will share the vision for our group in April 2027 and in 2030. This organization chart illustrates that our group is a comprehensive insurance company covering all areas, direct underwriting and reinsurance in non-life, asset type and protection type in life and both personal and commercial domestically and internationally across both life and non-life insurance. So comprehensive insurance company is the key for today's briefing session. However, we are not satisfied with the current situation. We aim to become an even more trusted and internationally expected comprehensive insurance company. Then I will explain how we intend to raise our level as a comprehensive insurance company and what our group will look like by 2030 to achieve this goal. Now please look at Page 6. This April, we increased the number of CXO roles in the holdings company to clarify responsibilities and authority for operating the comprehensive insurance group. International business is now generating stable profits across all regions. So to enable mutual sharing of strength, the International Executive Committee headed by the Chief Global Officer or CGO, was launched in April this year. And from April next year, we will incorporate the International Executive Committee or IEC, as MSIG International, an international business management company. The aim is to create an environment operated by multinational talent capable of global standard insurance management. Next, the domestic life insurance business. In the domestic life insurance business, we will jointly develop products with MassMutual that are expected in the new from savings to investment era that is emerging in Japan. And we will also establish a framework to ensure sales are conducted through sound and appropriate processes. To achieve this, we are reviewing whether the current 2 company structure is optimal. We are comprehensively considering the current situation and coming up with the plans that will be executed steadily. Next, in domestic non-life insurance, merger benefits will be fully realized. And on top of that, we will make sure collaboration with non-life insurance business through direct channel. And we will further work on transformation to strengthen the framework. On top of that, to enhance our value as a comprehensive insurance company, we will strengthen our policy advocacy functions through InterRisk Research Institute. Risks associated with non-life insurance business in Japan and outside of Japan in the global markets, we'd like to make sure that we have the appropriate and enhanced policy advocacy functions. As for the asset management, the asset management across group companies will be unified through Barings and the asset management functions will be further enhanced through group-wide collaborations. Right now, we are in the AI era. And with a view towards further AI technology advancement, we are also reviewing our system development framework so that we'll be able to leverage AI technologies. We are transforming the group's system development framework so that we'll be able to adapt to the changing environment in a speedy manner, both from the business perspective and also from the system development perspective. Next, please go on to Page 7. Through these growth strategies, we believe that adjusted profit of JPY 800 billion by fiscal 2030 and JPY 1 trillion in the early 2030s can be sufficiently achieved without additional business investment. So from now, 5 years to 10 years from now, we will be able to achieve JPY 1 trillion. I believe -- we believe that is sufficiently possible. As adjusted profit approaches JPY 800 billion and profits by business segment become more diversified, as shown in the pie chart at the bottom left, the need to maintain ESR at over 180% decreases and ROE will rise accordingly. From that perspective, we believe that we should be able to increase and improve ROE accordingly. Now please turn to Page 9. Last time, as you were informed, the adjusted profit in 2030 would be JPY 700 billion. The initial target for adjusted profit in fiscal 2030 was JPY 700 billion. But as initiatives have become more concrete across international, life, non-life and asset management, confidence and accuracy have increased, and the target has been revised upward to JPY 800 billion. And considering current market conditions, EPS growth target rate is set at 11% and adjusted ROE target is set at over 11%. And we believe this can be further improved through controlling net assets with share buybacks. With 11% as a starting point, we believe that we should be able to continuously improve these metrics going forward. Please now go on to Page 11. This slide shows the progression of profit levels by business segment up to JPY 800 billion. Each business' growth is solid. And therefore, the adjusted profit target of JPY 800 billion for fiscal 2030 can be achieved without new business investment, as was mentioned earlier. Going forward, strengthening risk controls and share buybacks will bring ROE closer to our target of 15%. Now please go on to Page 12 about EPS and DPS. Excluding gains from the sale of strategic equity holdings, securing JPY 800 billion in profit in fiscal 2030 will result in an average EPS growth rate of over 11% during the period. Going forward, as was mentioned earlier, we aim for higher EPS growth through profit growth and share buybacks as well as rising DPS through a progressive dividend policy. We believe these can be realized for sure. Next, please refer to Page 13 for our shareholder return policy. The total amount of shareholder returns continues to be set at 50% of adjusted profit. With dividends, our policy is to pursue a progressive total dividend amount. As sale of strategic shareholdings are being accelerated, the reduction pace of special dividends will be increased with ordinary dividends rising accordingly. Please look at Page 15. The sale of strategic equity holdings is progressing smoothly with almost all approvals from issuers obtained. Over the next 4 years, sale will be accelerated rather than evenly paced. And about 70% of the planned sales will be completed in fiscal 2026 and 2027. As for the proceeds from the sale of strategic equity holdings, there are no immediate plans for large-scale business investments. We will continue to consider investments in high-growth areas and overseas life insurers with stable and high cash flow with additional shareholder returns remain an option. On the other hand, there may be concerns about the supply and demand for our group's shares. Regarding shares of our company held by counterparties in equity cross holdings, we have already made arrangements for large blocks with a high likelihood of sale within this fiscal year. We will refrain from disclosing specific methods, but we will strongly promote the dissolution of cross-shareholdings primarily through sales to institutional investors in a speedy and strong, powerful manner. Now I will discuss the growth strategies for each business segment. Please refer to Page 17. First, let me explain the current position of our international business. The company already has a highly diversified business portfolio, broadly covering regions and customer segments around the world. We have been able to build a business portfolio that is highly diversified. The dark blue areas indicate the expected profit level at the JPY 600 billion milestone. By increasing market share in the Americas centered on MSIG USA and MS Transverse, we will expand international business earnings. Although W.R. Berkley is not shown in the diagram, the company provides products through specified or specialized teams to a wide range of customers, mainly in the United States, achieving high profitability and growth. Going forward, we will leverage strengthened partnership to link their growth to our own. We are in the process of coming up with specific measures. I will elaborate on that later. Please turn to Page 18. At the beginning of the presentation, I indicated that the international business would account for JPY 600 billion towards our JPY 1 trillion adjusted profit goal. Here, the path to that achievement is outlined. Up until now, because of the restructuring of Amlin that we have been focusing on, we have focused on resolving individual challenges such as the rebuilding of MS Amlin and entering the U.S. local market. But now each region is able to secure stable revenue. We recognize that we have now reached a stage to enhance growth as a unified group. Therefore, have decided to significantly review our international business management structure. At the center of this is the International Executive Committee. Starting in April this year. IEC or the International Executive Committee consisting of international business CXOs and multinational experts is organized to enable swift decision-making from a group-wide perspective. In Phase 2, from April next year, the International Executive Committee will evolve into MSIG International, a management company dedicated to the international business. In addition, by establishing a global HR system, we will build a management structure with highly skilled multinational talent and drive further growth in the international business. And in Phase 3, from 2030, group optimized global standard management will be established and a well-balanced portfolio centered in the Americas will be built. Achieving adjusted profit of JPY 420 billion in fiscal 2030 and accelerating growth toward an early JPY 600 billion level. So that is the growth story we have been depicting. Please go on to Page 21. This slide highlights 3 key ways in which the transformation of our international business management framework will drive sustainable growth in international operations. The first is raising the profit level. By globally implementing underwriting standards, profitability will be enhanced and sharing specialty underwriting expertise from overseas subsidiaries and W.R. Berkley within the group will allow for more sophisticated case selection and stronger profitability. The second point is stronger control over profit volatility. Diversifying by region and line of business will help reduce profit fluctuations, while standardizing underwriting criteria will strengthen underwriting and risk management. The third point is improved capital efficiency. By establishing a GRV, group retention vehicle in Bermuda, optimization of retention and reinsurance on a group basis will be promoted. So regarding the international business, in closing, please refer to Page 23. Regarding W.R. Berkley, acquisition of a 15% equity stake was completed in March '26. Starting with this fiscal year's results, our share of profits will be included. Steady progress on synergy initiatives, including expanding reinsurance transactions and collaborating on specialty underwriting in Japan and ASEAN will drive adjusted profit to JPY 100 billion by fiscal 2030. Currently, our seconded employees and W.R. Berkley members are in the final stages of discussing further collaboration measures. We will accordingly make announcements when decided. Page 24 covers the domestic life insurance business. Significant changes are taking place in market conditions and customer needs within the domestic life insurance industry. First, the shift from savings to investment, including the introduction of the new NISA is steadily expanding and is expected to accelerate further. This trend presents an opportunity for our group's domestic life insurance business. Our strengths are industry-leading asset type products from MSP Life and highly transparent and reliable sales capabilities through non-life insurance agents at MSA Life. So we have these 2 companies in place. Through our recent partnership with MassMutual, a major U.S. life insurer, we have further strengthened our capabilities in competitive product development and capital efficiency through reinsurance. On the other hand, following scandals in the life insurance industry, industry rules regarding product sales methods will become stricter. And customers are increasingly inclined to choose companies that offer greater transparency and trust. To accelerate growth, we have begun reviewing the restructuring of the life insurance business framework so that we can further leverage our ability to provide products that meet customer needs through highly transparent sales processes. With this aim and determination, we are currently striving to improve the business framework of the life insurance companies and the considerations have already started. Now please move on to Page 25. Due to the merger, the JPY 150 billion cost reduction from the merger of MSI and ADI is considered as a realistic target. So the goal is set at JPY 150 billion since last year, but it's not just about achieving the numbers, but efforts are underway to achieve it as early as possible. Please also look at Page 26, where we talk about domestic P&C business here as well. I will now explain the status of profitability improvements in auto and fire insurance. In both lines, product and rate revisions implemented over recent years have been effective, resulting in a clear downward trend in the combined ratio. On the other hand, particularly for automobile insurance, we recognize that further rate revisions are necessary to maintain an appropriate loss ratio for ongoing business in light of significant inflation effects. Although this is still provisional, a rate increase of around 6% for automobile insurance is planned for April 2027. Typically, we have done the revisions in January, but the timing this time around is April rather than January due to system adjustments required by the merger. For fire insurance as well, revision of rates and standard valuation amounts in April 2027 will help improve the loss ratio. One more thing I would like to talk about is on Page 27 regarding the domestic P&C business. Here, I will discuss our automobile insurance strategy, including direct channel policies. Currently, customers are increasingly shifting to direct channel automobile insurance, driven by heightened price sensitivity and greater use of comparison websites. As this trend is expected to continue, efforts are underway to clarify the roles of MS, AD and Mitsui Direct within the group. Related to this, please look at Page 28. Mitsui Direct will be renamed Mitsui Sumitomo Insurance Direct from April 2027, and its accumulated expertise in the direct market is expected to become increasingly strategic. We believe its value is going to increasingly enhance. Going forward to flexibly provide products that meet customer needs, coordination between MSI, ADI and Mitsui Direct will be further strengthened. Please turn to Page 29. Let me talk about asset management. First, regarding Barings, investment was completed this month and personnel placement has begun as well. Going forward, synergy initiatives will be fully launched, including not only strengthening portfolio performance through outsourced management, but also improving capital efficiency and life insurance and developing competitive products. The outlook for additional expected profit in fiscal 2030 remains unchanged at JPY 75 billion, including returns from dividends and outsourcing reinsurance transactions as well as volume discounts on outsourcing fees. Please look at Page 30. Here are the core strategies for asset management. In response to changes such as increased investment needs from the sales of strategic equity holdings and growth in international business, efforts will focus on enhancing investment infrastructure and expanding risk taking to further improve performance and profitability. Investment infrastructure is being strengthened through partnerships with trusted firms like Barings. And starting in April, planning, analysis and monitoring functions have also transitioned to a holding company-driven structure. In closing, please refer to Page 35. Let me explain our shareholder return policies. The annual dividend for fiscal 2025 is JPY 160, and the forecast for fiscal 2026 is JPY 170. We will continue striving to increase the total amount of dividends. Strategic equity holdings are being sold ahead of schedule. And as we look towards fiscal 2030, the shift from special to ordinary dividends will be accelerated based on progress in adjusting profit and changes in the market conditions. For share buybacks, the basic return at the end of fiscal '25 has been set at JPY 190 billion. And for the first half of fiscal 2026, a basic return of JPY 80 billion is planned. The total for fiscal 2026 will be JPY 270 billion, up JPY 50 billion from the previous year. This concludes my explanation about the material. I will be open to any questions that you may have. We would like to take any questions from the venue first, then after from people online.

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

This is Niwa from UBS Securities. I have 2 questions regarding international strategy and partnership strategies. In terms of the management model for international business, you talked about the new management model that has been implemented. From 3 perspectives, I'd like to ask questions. Looking at Page 19, what is going to change? To be honest, I'm not perfectly clear about that. And for you, how challenging will it be to implement this new management model? And from the federated model to individual model to leverage the individual strength. I believe that is your objective. But what is going to change from the as is model? As for global talent, will your company be attractive to global talent, how are you going to leverage the employment opportunities for the international business? The other thing, the partnership strategy on the holdings level, I'm interested in knowing more about that. While other companies, your peers, Tokio Marine, they have the alliance with Berkshire. While in your case, you are a company with restructuring history. So ROE 15% target in 2030, is there any strategic option to achieve that target ahead of -- well ahead of the time line? Or are you pursuing your own strategy individually? Regarding the international business, through the change of the management model, what is going to actually change? Well, from the federated system to centralized system, it appears that the transition is towards a centralized system. But what is actually changing? As a matter of fact, in order to secure global talent, does this change carry significance or will be effective to secure global talents?

Let me first share my views on that. And following that, CGO, Morimoto will add comments as necessary. Up until now, Mitsui Sumitomo and portfolio companies in which we have invested, Amlin and other companies. Those companies and ourselves, we have been engaging in one-to-one conversation and dialogue. As a result, we are able to produce the outcomes as we did. And Amlin in the same manner, just recently, MSIG USA local business was launched just recently. So over the past several years, we have implemented various initiatives. As a result of these initiatives, we have learned lessons. We have learned many things. We have produced successful cases as well. Not only dependent on each individual relationships, but on the overall group level, we have been able to share the values of these and that would lead to overall optimization. While the group companies as well as the holding companies, it's not just about the Japanese ways of thinking and expectations that we have. But in each local market, local management team, local leadership, by knowing more about each other, they will drive the growth for which they are responsible. And MSIG International as the base company, the international business will work as a team, one company, non-Japanese members are positively receiving this progress because they now have the responsibility and authority that is widened. They will be able to demonstrate their strength, leadership in the global company. And they are the ones who will create the future of such a global company. That will be a driving force, a big driving force. Speaking of a person aiming higher, aiming something different from what they have achieved in the past, they will be able to go one step ahead and go 1 mile extra. So speaking of this sort of a transformation, as we transform ourselves into a global company, this is absolutely necessary processes and that is my view. And accordingly, the moderate federation processes, instead of following those processes, we'd like to make sure that Japanese and non-Japanese members within a single company will be able to fully play their expected roles, how we can come up with a system as quickly as possible. We are following the necessary steps towards these visions. May I -- did I answer your question? Morimoto-san, if you have anything to add as CGO, your aspirations and what's your feeling right now? Would you like to share? Well, regarding this structure, CGO is a Japanese person. On the other hand, there are many non-Japanese members or management serving as CXOs. In the past, in this industry, this is a very rare structure that was established in this industry in the past. And now I'd like to ask our CGO to share his views.

Thank you for the question. This is going to be a big change. So this is a challenging endeavor, but we are fully confident in achieving this. Why are we doing what we are doing? To put it simply, as the President mentioned at the beginning, in 2030, -- towards 2030, we -- as a group, we'd like to transform ourselves to generate higher profits. And international business is to make a significant contribution. JPY 300 billion in current level is going to be doubled. This is a necessary processes that we have to follow towards that end. And this is a big endeavor, as I mentioned earlier. Why are we doing this is that individual company, we have accumulated delegating authority sort of initiatives in the past. But we cannot really maximize the group power on an extension of what we have been doing. U.S. centered structure, there are some conflicts among the group companies that was within the expectation. But thanks to what we have been doing, the growth in the U.S. has been faster and stronger than expected. And what was expected to happen happened much quicker than we anticipated. So as a headquarter function, we had to clarify the functions and the underwriting appetite as a group policy needed to be disseminated. Well, previously, one by one response was made, but we have to make an integrated policy as a group. And as part of this initiative, we wanted to really integrate the individual practices to make sure that we set forth the group vision and group wills clearly and whether this change is going to be attractive to secure global talent, we believe that this is going to constitute so much attractiveness. We had this concept 1 year ago already, but MS International Strategy Committee, we talked about this concept. And although there were some differences, we were able to gain 100% unanimous agreement. And some of the members pursued this direction. If there are career development structure that is going to be established, this is something that they really wanted to promote. Well, by participating in this new framework, they saw clear opportunities for them to leverage their strengths. And by having this overseas international businesses, the clear roles and responsibilities are now implemented. And we believe that overseas international members are positively receiving this. And to the second question, ROE, 15%. In order to accelerate the achievement, is there any possibility to consider capital alliance in the future? Adjusted profit, JPY 1 trillion, processes towards this goal. And when we achieve this level, considering the ESR, when we consider the capital structure, first, the hurdle of 15%, we don't think that this is something that we cannot achieve on our own. So if we are only targeting ROE 15%, it doesn't necessarily require a capital alliance. But in order to accelerate the achievement timing, what would be the optimal capital structure? Well, we are not really eliminating any possible options. We are open to consider various options. But if there are any other members who would like to comment on their views, no views.

Muraki-san?

This is Muraki from SMBC. I have 2 questions. Looking at Page 15, on the right-hand side of the slide, for the Americas business, reinforcing capital is what you are going to need. It says capital enhancement for growth strategy in the Americas. For the competitive environment and rate environment in the Americas, what is your view right now? You are seeing good top line growth. So I think it's capital increases at MSIG. But what kind of scale are you considering? Have you already done that? Or are you going to do it going forward? That's my first question. Second question is about, you said comprehensive insurance company is a keyword today. So what is that intention? And for the life insurance business, it's quite big, including the overseas business as well. And that's why I presume you said comprehensive insurance company. But for life insurance, according to your explanation today as well as the last time around, I think you were implying that there might be some reorganization within the group because you were saying that you are considering. So if you have any updates, I would be happy to hear about it. And also on Page 15, for corporate pensions and overseas life insurance business opportunities, I think you're implying M&A when you say investments. But what do you mean by that?

First, regarding the business in North America, we don't need new vehicles, but in the current organizational structure, we can grow our earnings by 3x because the North American market is property-centric, it is softening mainly in that area. And also in the casualty area, it's actually -- we're seeing ongoing hardening. So it's not softening across the board. So I think there's still opportunity to increase earnings. So then MSIG USA, why is it regarded highly? And why is top line and earnings growing? It's because of brokers in the U.S. from their point of view, MSIG USA is mainly increasing performance around the broker market or the open market. So from the broker's point of view, insurance company that is highly rated will offer stability to their policyholders. So in our U.S. business, capital allocation, our capital allocation strategies are being regarded highly in the open market. And we believe there's still opportunity for more underwriting. And we believe that scale is 3x more. So we've been able to envision that picture. Therefore, we would like to enhance capital. That's what we were implying in this explanation on the slide. For corporate pensions, in some geographies or regions, there are some areas where it's being strengthened strategically and in the life insurance area, in the areas to which we allocate capital, we are assuming that there may be a business opportunity. It's not about making investments immediately. But as you can see here, if we can expect -- we will be selective in selecting areas where we can expect steady cash flow. So for liabilities and assets, it's not going to be extremely high from the initial stages, but it will be gradual. So regarding the JPY 700 billion, the investment into Berkeley that we have done before and midsized investments into bearings, that's not the scale we are thinking about. Also, with respect to what we're doing around life insurance, so from savings to asset management is a trend that has been upheld over various generations of administrations, and we believe this will continue going forward. And the options for the people of Japan, there's equities, there's fixed income as well as investment trusts. In the case of Japan, life insurance products, some people want to take out life insurance. It is still a promising area in that regard. So what we have in the primary vehicle with expectations that products will be delivered, it can be assumed that sales volume will grow. And MSA Life through its channel, because of the relationship between primary and MSA, we have been expanding sales and customers and agents well received ourselves, and we feel that this business is promising looking out into the future. In the life insurance industry, the competitive environment has been changing, and we believe more changes are down the road. So by leveraging the strengths of the 2 companies, we need to think about what kind of structure is ideal. And that is why we are striving to consider the reorganization. It may change, it may not change. But in the next several months, we would like to ensure we go through a good verification process. There's still uncertainty around to the extent of how rules are going to change. So we don't want to draw conclusions quickly, but that's the time line under which we are making these considerations.

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

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

Let me make a comment. As you rightly said, Muraki-san, where the property market, it has been falling by around 10%, but the impact from softening has been small for us for excess liability, for cyber, for political risk areas. Those are the areas we would like to focus on or we are focusing on. Originally, we were late in entering the non-Japanese business. So our history was shallow, meaning we are in a positive position to develop the business for distributors and agents and transactions, we have been working on that as well. We have about a 10-person team in the U.S. that we have built up. Touch points with the broker, we didn't really have that before. But now we are creating a team so that we are able to do so. And also for A+, our ratings is well received. For example, in the U.S., there's about 2,500 to 3,000 P&C companies, but there's only about 10% more or less of companies that have a ratings of A+. So this is well received. And also, when it comes to Mitsui Sumitomo Group Company, which is ourselves, which has tradition from Japan, the way we are perceived in the U.S. market is positive. High reputation underwriters have been attracted as well, and we have been able to generate good impact. And in the surplus market, strong wholesale brokers or aggregators, partnerships have been worked upon. We have teams that are focused on distributor-specific opportunities in order to strengthen our business there. Thank you very much.

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

This is Watanabe from Daiwa Securities. I have a couple of questions. First is on Page 11. Regarding basic return, the adjusted profit from FY '26 to '29 is raised at JPY 800 billion, 50%, that means more than JPY 400 billion. Is that the level we can expect for shareholder return? And of which the proportion of dividend, the SOMPO Holdings dividend payout ratio of 50% is the level they are aiming at by FY '30. And are you also setting that dividend payout ratio as metrics? Next is the pricing strategy on Page 26. This time, auto as well as fire insurance, you are planning to implement rate changes in 2027 April, while the natural disasters are decreasing in number. Can you talk a little bit about the background of the price revisions? And in April, former MSI and former ADI products, those products will be integrated as of April 2027. Regarding the adjusted profit, JPY 800 billion, the total return ratio of JPY 400 billion. Is that right?

I understand that is your question. Yes, JPY 400 billion is the level that we are looking to achieve in terms of dividend. In terms of the dividend payout ratio, up until now, in terms of absolute value, over the past several years, we have been increasing by JPY 10. So sharing the increase that is easy to understand. is leading to higher recognition of our business. And we -- that was a driving force for us to create an environment where investors can make investments at ease, with confidence. Well, when we achieve JPY 800 billion, what is expected of us? And what capital policy needs to be implemented? There is highly possible that the environment surrounding our business will have changed, but we'd like to make appropriate decisions as necessary. And we would like to also make sure that we will live up to your expectation. That was to address your second part of your question. Is there anything to add? Nothing special? If you have dissenting opinions, please share. Next is regarding fire insurance. Over the past year or so, more than expected, the natural disasters compared to the past incidences, the natural disasters did not occur. The number of natural disasters was lower than expected. But based on our modeling, unfortunately, this fiscal year and onwards, we have to assume that some sort of natural disasters would occur. Based on that, product revisions and rate revisions will need to be implemented. especially auto and fire, what is common is the repair cost, the cost of parts and components and repair-related personnel costs, labor costs on both fronts, these costs were not particularly high in the past, but these costs have been rising. So how we have to address these cost increases is part of the societal issues. So the repair-related costs have been rising more than the inflation rate. And that is something that we have to assume. And under the circumstances, we believe that product revisions and rate revisions will be necessary. The revisions are scheduled in April that the products to be offered in April and beyond, MSI and ADI will be one company. So it is right to assume that the products of MSI and ADI will be integrated by then. That is true.

Next, Takemura-san, please go ahead.

I'm Takemura from Morgan Stanley MUFG Securities. I also have 2 brief questions. Regarding the sales pace of strategic equity holdings, I just wanted to confirm if I understand it correctly. So I'd like to check that with you. Somewhere in your explanation regarding strategic equities, for this fiscal year and next fiscal year, you were saying that you will go through the procedures to sell. It's JPY 1.6 trillion out of the JPY 2.3 trillion, which is JPY 400 billion, which means that for next fiscal year, it's going to be really high if you do the math. So can you talk about the sales pace for strategic equity holdings for this fiscal year and next fiscal year? Is it going to be even over the 2 years? Or is it going to accelerate next fiscal year? That's my first question. Second question is regarding automobile insurance, direct insurance online. I would like to hear about your thoughts. I've been participating at other companies' briefings as well. And I think they are also saying that they would like to focus on the direct business. And there has been some dynamic share changes as well. But what do you think is the reason why people select your product? And how are you going to strive to increase your share?

Regarding the sales of strategic equity holdings and its pace, with the issuers, you need to agree with them and gain their approval. So according to the agreements we've been reaching, it will be over this fiscal year and next fiscal year, but the balance is not necessarily the same and even. So that difference is reflected in our earnings plan or guidance. Does anyone else have something to add from our side? No. One more thing is for the direct business and how we view the market. other companies and their strategies on the direct business, I have not yet taken a close look at it. But based off that, doesn't necessarily mean that it's similar in strategy. In the case of our company, for auto insurance solicitation rules, it is going to change substantially and the necessity for comparison is going to increase. So issues in comparison with other company products and prices are not just going to be the sole issue. In the new solicitation rules, it's a matter of towards the customer, how are their needs going to be reflected and how the -- well, customers used to work with a certain distributor. And depending on its circumstances, we need to be able to offer products that are relevant and in an appropriate way. So it's more of a methodology thing. It's not just about competition and rate setting no longer. It's about the process of delivering products to the customer and which format is most relevant. So that is what we need to -- we are striving to reconsider and reestablish. And that is why we wanted to talk about this area of business. So with the customer, so agents used to do the solicitation. But after the rule revisions, the 3 parties need to figure out the new way of doing business. And it's not just MS&AD. But on top of that, the direct business will be coming into the picture in order to create an organization or team that is more optimal from the customer's point of view. So I hope you could understand that as you compare ourselves with other companies. Thank you.

Sato-san, please go ahead.

This is Sato from JPMorgan Securities. I have 2 questions. First question is on Page 7, the future profit outlook, JPY 1 trillion. Just as an image, well, maybe the number is rounded up by the unit of JPY 100 billion or so. Well, on top of that, I would like to ask about the international business path to achieving the JPY 600 billion adjusted profit. For domestic non-life insurance, the meaning of this JPY 300 billion in around 2030, the target for domestic non-life is JPY 240 billion. So does that mean that you still have a room to further grow? Well -- or if this number includes the financial services, that means that the growth will be flat from that point on. If the former is true, well, the sale of strategic shareholding is accelerated and the merger effect of JPY 150 billion is going to materialize. From FY 2030, what are the drivers that you are expecting to leverage? That was my first question. And second question of mine is regarding the organizational transformation, the life insurance planning department was established. While this is attracting an attention, it was spun out from the total planning division or so. And Kudo-san and Morimoto-san are the executives in charge of this function. So it seems like this department has a mission beyond what measures to implement to grow the life insurance business. So what was the rationale behind establishing this department?

Regarding the growth outlook of the domestic business, well, in the domestic market of Japan, non-life insurance business or market is a rare market that is continuously hardening. While when the world market is hardening, the Japanese market was softening. So the appropriate premium and design and premium setting is going to be necessary. And risk management promotion has been driven by the central government, and there is a new supply-demand situation arising for new products because of that. So this is an area with moderate growth. And life insurance planning department, well, when you talk about the protection gap, this is in non-life insurance market, those who are living close to the mountainous areas and cliffs, the feasibility of enrolling in insurance programs or the premium burden on the young generations, those topics tend to be discussed first, that the so-called area of human beings or in the area of life insurance, the health care provided and the prices of that medical treatment can be paid by individuals based on certain financial conditions. As the aging society is emerging, the pension burden is also increasing. So in the area of life insurance area, the protection gap is expected to widen. There is a heightening risk around that in Japan as well. In that regard, the reason of existence of life insurer is increasing. How we are going to address this challenge, we have to consider that. And we have to establish the system and structure in order to address this challenge. And this is the reason why we have been putting together the team of this life insurance planning department. Kudo-san, who is the executive in charge of this department, if you have anything to add?

Thank you for your question. Up until now, within the comprehensive planning department, we have been addressing the societal challenges with the relevant businesses. But basically, what we have been doing is the monitoring. And with the merger of MSI and ADI, the holding companies and operating companies' roles and responsibilities are changing. Under the circumstances, as Funabiki mentioned at the beginning, we have been considering the optimal structure for the future. the consideration was and has been necessary. That's why we established this department. The background to that is that the domestic as well as international life insurance companies in order for us to become a comprehensive insurance group -- insurance company, we have important missions to be performed. And I myself will be responsible for domestic and Morimoto-san will be responsible or cover the international side of the business. And that is how we divide roles and responsibilities between us.

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

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

Going back to your focus on the direct business, well, maybe it's not a focus, but putting importance on the direct business, that's how I interpreted it. But at the beginning, you were saying -- you were talking about resolving the cross share holdings. I think I heard that. And also the deader channel, it's going to change and be reorganized. The dealer channel is going to change and you had overwhelming strength in the auto dealer channel. But do you think that things will have to go to the direct channel? Is that unavoidable? The other thing is regarding consolidation of offices or sites, I'm talking about integration. I think you're already working on the consolidation. But how about the HQ functions for ADI and the dealer channels, and for Aioi Nissay, unlike other non-life insurers, I think it's slightly different and unique. So integrating the head office, is it going to be integrated as of April 1 next fiscal year?

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

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

Well, we don't think that they are going to immediately implement direct type products. That's not being assumed. Secondly, regarding head office integration for Aioi Nissay Dowa and for departments that are in charge of unique channels, but areas that were their strength, respectively, how we leverage off those strengths is what we need to consider. as we consolidate. So maintaining and leveraging the strengths even after we come together so that it generates synergies is important. So we need to do these things together. So under one head office, we are already preparing to work as one. I hope that answers your question.

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

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

Sakamaki-san, please go ahead.

This is Sakamaki from Mizuho Securities. I have 2 questions. First question is regarding the bolt-on opportunities for Asia business. What sort of bolt-on are you looking to consider? In existing market, are you going to achieve share gain? Or are you going to expand your operating areas, geographical expansion? Can you talk a little bit about that? The second is strengthening the domestic non-life insurance. In international, you are enhancing collaboration between regions to share know-how and expertise. But when it comes to domestic, you don't really talk about the domestic side of the business. Your peers are importing the expertise from international to domestic market. What is your thinking?

For Asian bolt-on opportunities, speaking of Asia, we are focused on ASEAN. We have licenses and bases in many countries and regions. And in any country, one thing common is that the number of companies is quite large. So bolt-on and other opportunities, we'd like to consider to acquire necessary parts or trade those parts that are necessary. So of course, we are anticipating such movements will progress. And of course, the distributors, same as in Japan, there are a large number of distributors in a very complex manner. How we are strengthening the distribution capabilities, we may consider an investment in that area as well. So when we say bolt-on, there are a wide variety of opportunities. The ticket size, well, we are not really considering of a huge ticket size for each and every investment case. And when it comes to our alliance in international market and how we are importing the expertise gained from those alliances back into Japan, this has to happen for sure. And in the past, from that perspective, I have been expressing my views in meetings quite proactively that these are very things that have to happen and investors and other regions, foreign investors didn't really appreciate that view because these have to happen as a natural consequence. Well, if necessary, I'd like to set up another opportunity to walk you through what we have been aiming to achieve.

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

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

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

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

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

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

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

So let me ask the question first.

No, no, no. Let me answer your first question then about India. For India, population is increasing, economic growth rates are high. So in the past several years, we have been focusing on the business quite a lot. Regarding headcount, we've been reinforcing our team under the agreement we have with our partner. But competition is quite intense in India. And the rate levels for the P&C market is very low. So if you invest people and capital, it's not as easy to generate profits. It's not that easy. Having said that, we are not able to invest into multiple numbers of insurance companies due to regulation. So you have to do business exclusively, and it's about how you swim in the red ocean. So that's what we are working on right now. But it's confidential as to our strategy. So let me withhold for today. What is your next question?

My second question is about -- not about your performance or results, but autonomous driving and your response, how are you going to do about these trends? For example, in San Francisco or in Dallas, when you look at what's happening around robotaxis, at an early stage, one can surmise that it's going to happen fairly quickly in Japan. And also Waymo, a key player, they have started feasibility studies in Japan. And you were talking about up until 2030 today. But I do believe that autonomous driving may have an impact by a certain degree. So if I'm wrong, you could tell me that. But let me know how you are going to do about this.

For autonomous driving, when I visited the U.S. and when you go to the West Coast, obviously, there are opportunities to ride. And if you go to China, Shanghai, there is opportunities as well. But it's basically for geographies that have wide roads. But in the middle of Manhattan, I don't believe there's opportunity for autonomous driving yet. And also for China, I shouldn't be talking about China that much because I might be restricted from entering the country, but there are places where you can drive autonomously and other areas where you cannot. So it's not that easy to implement the technology. So when you think about Japan, I think there will be limited places where you can drive autonomously. And when you think about unified types of auto insurance, we still have various challenges we need to overcome. That's my view. But anyone that is well versed on this subject? Kudo-san that used to do product development.

Thank you for the question. As the CEO just said, I think it's going to take a little more time. However, in Japan, when it comes to regional cities in Japan, there is a serious driver shortage happening. So although there are issues that need to be addressed, I think the introduction of autonomous driving or robotaxis may be earlier. And also for transportation companies, meaning vehicles for commercial use, mainly around expressways, there may be some autonomous driving vehicles that will be adopted. So my personal view is around fiscal 2030, whether the technology is going to be embraced. I think we will still have more vehicles that are with drivers. So the adoption of the technology might be slightly beyond 2030. So does that answer your first question? What's your second question?

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

Next, Ms. Tsujino from BofA Securities.

This is Tsujino from BofA Securities. There are 2 questions. First question is regarding Page 21. WRB specialty know-how will be shared across the group and equity method subsidiary, when they become such an entity, in what ways will we be able to share their expertise? And at this point in time, what is the area you see good progress? The other question is regarding the cost reduction, Page 25. Agent commission, JPY 50 billion reduction will be aimed. How are you going to achieve these cost reductions? Primarily in the commercial area, are you looking to reduce the cost significantly? Do you have any visibility when it comes to this cost reduction efforts? I'm not sure whether you are able to address this question here in this session, but how are you going to reduce the costs this much? Can you talk a little bit about that?

First, with regard to our alliance with W.R. Berkley and how we are sharing their expertise, the equity method adoption with this -- with our investment of 15%. Well, we -- even before we came to an agreement, we talked about how we share their expertise. And now they have accepted our personnel to work in their business, and they are well versed with what we need. And even in Asia, what are the things we can provide in Asian market. In a very thorough manner, we -- they have been giving us lectures. While it's not within just 1 week or 1 month, we will be able to absorb their knowledge. Of course, we will need to take more time and in line with building trust relationship with them, we'd like to make sure that this will happen. When it comes to agent commission, we are not looking to introduce uniform commission reduction. It is not such a one-way unilateral method that we are looking to implement. There are solicitation-related laws and revisions are expected and commission rates will change along the way. Under the circumstances, what level commission rates will be considered and will be finalized. The commission rate system, how we are changing the items based on which commissions are determined, this is sort of an internal discussion that needs to happen. And from that perspective, we cannot really disclose any more information at this point in time. Are there anything to add from our members? No.

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

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

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

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

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

Thank you very much.