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

Thank you very much for joining us here in New York for our IR Day today. At present in Japan, there's uncertainty surrounding interest rates, foreign exchange, the stock market and inflation. So there are many uncertainties. In addition, the laws and rules governing the insurance agency business are also entering a period of major change. In this environment, we believe it is essential to review our management strategy with both speed and flexibility. We also believe it is important to communicate those changes to investors in a timely manner. As part of that effort, we assigned two IR team members to New York starting this October. Let me introduce Wendy Mura and Kari Omya. Kari is right there. We look forward to your continued support, especially for those two members. So please turn to Page 1. Today, we see ourselves as a comprehensive insurance group to drive growth. On reinsurance, [indiscernible], Reinsurance wise, MGA. We have been able to put all those businesses on track. And Japan is now aiming to become a leading asset management nation. And we have a range of businesses to offer necessary products. So let's pause for a minute because I was going to deliver the most important message of the day. In the past, Japanese central government wants to have Japan to become a leading asset management nation. In that context, our group also has life insurance companies that can provide wealth accumulation products. This is a great advantage to our group. In domestic P&C insurance, the merger of our two core companies next April will create the largest non-life insurance company in Japan. At the same time, to respond to changes in the market environment, we are also strengthening our direct insurance business. To make the most of these business foundations and drive further growth, we are going to change our group name next April to Mitsui Sumitomo Insurance Group or MSIG in English. Under the motto taking a risk, leading the world, MSIG is going to work to further enhance the group's corporate value. Now let's turn to Page 2. To maximize the strength of a comprehensive insurance group, it is not enough for each business simply to expand its presence in its own market and grow earnings on its own. What matters is strengthening the collaboration across the group and creating greater synergies among our businesses. By doing so, we aim to further enhance our competitiveness and growth potential and become a group that stands alongside the global peer leaders. And we establish an organization so that we can manage globally. So we set up a company that is going to manage the business in a centralized manner, MSI International, which is going to be established in April next year under the holding company. Under such structure, in order to enhance corporate value, we are going to make our growth story even more concrete. Now let's turn to Page 3. At this point, the metric I place the greatest emphasis on in our growth story is ROE and its enhancement. At early 2030s, MSIG aims to achieve ROE of around 15%. Our group aims to become a comprehensive insurance group with such an aim. So how to grow profit and how we can improve capital efficiency. Let me explain our thoughts today. Now please turn to Page 4. Let me begin with our earnings outlook. Our group has already mapped out a clear path to secure adjusted profit of JPY 800 billion by fiscal 2030 and to reach JPY 1 trillion in the early 2030s. Please turn to Page 5. Here, I will explain the core drivers behind that path. First, domestic non-life insurance. Through the merger of MS and AD, we believe we can fully achieve a JPY 150 billion reduction in expenses by fiscal 2030. In addition, in both motor and fire insurance, we have been implementing rate revisions in response to changes in the market environment and improvement in the combined ratio has been progressing broadly in line with our plan. At the same time, to address the risk of policy outflows following rate increases, we are also strengthening our direct business. Furthermore, as we expect tighter requirements for the continued operation of corporate agencies in the future, we are also strengthening collaboration with bank agencies and brokers. Next is domestic life insurance. Last fiscal year, we already carried out a reallocation of our bond holdings in response to rising interest rates. Going forward, in line with the Japanese government's policy of shifting from savings to investment, we will strengthen our life insurance sales platform in order to capture a share of the JPY 1,100 trillion in cash and deposits within Japan's household financial assets. At the same time, life insurance is also a business that carries a meaningful capital cost. For that reason, we will improve capital efficiency by advancing the joint development of variable insurance products with MassMutual, while also making proactive use of Martello Re, a reinsurance company in order to enhance capital efficiency. In addition, in Japan, stronger governance over sales representatives is becoming unavoidable to effectively strengthen governance while also enhancing product development and sales capabilities. We would like to reach a conclusion in the near future on how best to position the current two company structure of MSA Life and MSP Life. And once decision is made, we'd like to inform you without delay. Please turn to Page 6. Finally, let me turn to our overseas business. That is the businesses outside of Japan region. Growth in overseas business is at the center of our group's growth story. And within that, the United States is our most important market. That is why today, Peter, CEO of MSIG USA and John, CEO of MS Transfers will each give their presentations. Peter and John are the main speakers today. After the presentations by the two individuals, please ask a lot of questions to them. Please turn to Page 7. As of the market value at the end of March 2026, our strategic equity holdings stood at JPY 2.3 trillion and disposals are progressing as planned. The key question at this point is how much of the proceeds should be allocated to pure investment assets. Taking into account the outlook for Japanese equities, interest rate trends and the level of asset liquidity the group needs to maintain, we are currently examining the optimal balance. From that perspective of achieving an ROE of around 15% in the early 2030s, we will make the best possible decisions. Please turn to Page 8. Finally, let me touch on shareholder returns. We will continue to target total shareholder returns equivalent to 50% of the adjusted profit. In addition, as confidence in achieving our fiscal 2030 adjusted profit target increases, we will gradually shift from special dividends to ordinary dividends. As for share buyback, we will make the most appropriate decisions while keeping ROE improvement firmly in mind. After this, each of the business leaders will explain in greater detail the specific strategy for our North American business and the initiatives underway to realize it. We hope you will see clearly why we position North America as a core growth market for our future and how we intend to execute on that opportunity. That concludes my presentation. Thank you very much.

Thank you very much. Now we'll be happy to welcome Mr. Morimoto to the event to be speaking about his role and MSIG. Thank you very much.

Good morning, ladies and gentlemen. Thanks for coming today. I am Hironori Morimoto, Chief Global Officer of MSIG. Before I start my presentation, let me tell you about my goal today. I'd like for you to get to know me and would like to give you my vision for our international business, which is this. MSIG International will drive value enhancement within the group -- with the group in achievement of our aspiration and up the next generation to place goop on track for sustainable growth. Here's my title. And here's my career within MSD. I have spent most of my more than 35-year career in the international business and have been deeply committed to its growth and transformation. Today, it is particularly meaningful for me to have the opportunity to present here in New York, the heart of the United States, the world's most sophisticated insurance market. Before driving to presentation, let me ask everyone two questions. First question, what is your image of MS and AD? Does anyone have any specific image? Don't worry. Even if you do not have a specific image now, today, I'm here all the way from Tokyo to give you my vision of the future of the group. So you have a clear image when my presentation is over. Okay. So let me move on to the next question. Do you know any Japanese baseball player inducted into the national baseball or of him? Does anyone know? No? [ Joe, ] yes. Thank you, [indiscernible]. Yes, it is [ Suzuki. ] He was inducted in the National Baseball Hall of Fame in '25 as the first Japanese baseball player. Probably you are wondering why I'm asking this question because I can see in each law, lots of similarities with MSIG, in particular, his outstanding strengths. He has the strength of each law, which made him succeed in the major league baseball, speed, consistency and capabilities. Let me explain how such strength are translated into the strength of MSIG. First, agility. We capture opportunities through the fast decision-making and agile capital deployment. Transformation of the United -- U.S. business is the greatest example. Second, long-term commitment. We are committed to building our position in the U.S. market over time, just like we built our current position through our journey over the last 100 years. Lastly, financial strength that will provide the trust and stability needed to support our growth in the U.S. When [indiscernible] started playing in the U.S. in 2001, he was not familiar to baseball front as well as the baseball critics in the U.S. and no one was expecting the remarkable success which he has made. Similarly, MSIG is not popular brand in the U.S. right now, and we are still a challenger in the market. Maybe it will be difficult for us to be a member of the insurance Hall of Fame next year. However, my goal today is to demonstrate you that MSIG has significant potential to succeed in the U.S. market, just as [indiscernible] succeeded in the area of aluminum baseball. By the end of today's session, I'd like to give you confidence that our international business will be a key driver of the group growth, especially by our success in Europe market. Our core group companies, MSIG USA and MS Transpers are the key strong drivers for growth. So I will present from the group level first, and then Peter and John will present more in detail our strength in your market. Let me begin by sharing the philosophy behind the development of our international business and the principles that has guided us throughout our journey. These are the snapshot of our creates in the U.S., Asia and Europe. MSIG is already operating locally and staffed by locally hired professionals, providing insurance services for local customers. We believe that long-term success depends not only on financial performance, but also on building sustainable, trusted basis relationship with our customers locally. Our principle is to be acknowledged as a valued partner in the local community through providing services for local customers by our local employees. For example, MSIG USA partners with St. Jude's Children's Hospital to help St. Jude's advanced life-saving treatment and research for childhood cancer. We will never stop striving to become recognized trusted partners in the U.S. insurance industries and local society. Here are the principles on the philosophies of the founder of Mitsui Group and Sumitomo Group, which have almost four century of heritage, four century, not 250 years. I'd like to stress that philosophy is still valid today and has been transferred -- translated into our present day values, integrity and consistency. My role is to make our company's mission clear and pass this mission together with our philosophy to next generation. So we will continue the journey of sustainable growth for, say, another 400 years towards 2,500. This may sound super exaggerated, but I'd like you to all have sense of long term within our context. The history of our international business dates back to more than a century ago when we established our first office in London in -- sorry, in 1924. Today, more than 90% of international business revenue comes from non-Japanese clients, and that is why we place great importance on our business principles. The principle has become consistently reflected in the path we have taken. Going forward, we continue to operate based on this ever-lasting philosophy and core values. Let me move on to where we are today. MSM AD is already the #1 P&C insurer in Japan and a global player with almost 40,000 colleagues in 48 countries and regions over the world. We are also the #1 P&C insurer in the ASEAN region. Our group international business has grown dramatically with profit increasing by approximately 14x over the past 5 years. In '25, profits reached approximately USD 2.3 billion or JPY 350 billion, making the international business a core pillar of the MS&AD Group. We have been expanding through locally looted business growth by meeting our customers' evolving needs. As a result, profit from our international business has grown at a significant pace. In particular, in addition to our long-standing strong presence in Asia, our European and U.S. business are growing substantially. Together, they form a diversified and balanced portfolio that has made a significant contribution to stabilizing our earnings. Also, our business segments have broadened dramatically over the diversified line of business, customer segments and regions. And importantly, our group brand will be rebranded from MS&DD into MSIG in April '27, as Mr. Fumiaki mentioned earlier. In the context of international business, we are already using that MSIG brand, but we are confident that unified the brand across the group will enhance our value proposition to customers. Next, I'd like to explain our aspiration and the key initiatives we will undertake to achieve them. Beyond 2030, international business are expected to achieve ROE at a level that exceeds the group target of 15% and to generate 60% of target group adjusted profit, which accounts for approximately USD 4 billion. They are ambitious targets, but I believe they are well within our reach by executing key initiatives. Let me elaborate on our new management structure in the next slide. We will establish MSIG International in April 27. This is a company dedicated to management of international business. The key objective is to achieve the best of both worlds, preserving the strength of individual companies while simultaneously optimizing the performance of the group as a whole. MSIG International functions at the center of excellence, including provision of strategic support and sharing best practices across the group. As we expand this business, talented individuals with relevant market experience will serve as executives at MSIG International. This will enable us to leverage their local knowledge and expertise more effectively. This new management structure will enable us to maximize the collective strength of the group. As you see here, more than half of the new executives members have been appointed from our diverse multinational talent pool. As the Japanese ensure we will continue to maintain long-term perspectives. At the same time, by bringing multinational talent into the group management, we will advance with agility and speed characteristics of leading global organization. From a profit growth perspective, our U.S. strategy is the most important strategic pillar and the most important topic for today's presentation. Peter and John will explain the key elements of our U.S. growth strategy in greater detail. We have prepared also key strategy in the APAC and EMEA regions, which I can elaborate in Q&A session later. This concludes my presentation. Again, today, I make a firm commitment to becoming a prominent player and a valued partner in your market, right, each all by maximizing our strength. I look forward to continuing our dialogue with you all and the broader investment communities as we execute on this strategy. Thank you very much for your continued interest and support for MSIG. Thank you.

Good morning, everyone. Peter McKenna. Very nice to have you this morning. As Hiro mentioned, I'm the CEO of MSIG USA here in the United States. I've been in the insurance business for over 35 years. I've worked at many different organizations, namely AIG and Ryan Specialty Group here in North America as well as in Europe. I have the pleasure to speak to you this morning around the development and expansion of the MSIG USA brand here in North America. I've been with the organization for just a little over 3 years -- or 4 years, excuse me. And we've embarked on quite a transformation of the organization here in North America. The main focus and main vision for our leadership team over the last four years is to develop and build a data-driven specialty insurance carrier. And that's focused on three critical areas: One, underwriting excellence and claims excellence; two, building a data organization that has the capability to scale and transform how we underwrite our business as well as expanding and being very succinct on our distribution strategy, whether that's in the U.S. retail segment or the U.S. E&S space. This has all been undertaken with a great leadership team and a tremendous amount of new energy into our organization here in North America. As you can see, the transformation here at MSIG USA has been quite significant since the management team has changed direction. We started our journey in 2023. And as you can see, the gross written premium as well as our profits have exceeded many, many of our expectations. This has all been driven through the implementation of what we're classifying as our underwriting workbench and our data-centric operating model. As you can see as well, the underwriting expense, a key driver in all insurance businesses has been moderated and currently forecasted to be approximately 26% by the end of this calendar year. What I'm also quite proud about from the organizational perspective is the underwriting profit that continues to expand and forecasted to be in the neighborhood of around $200 million by the end of 2026. On top of that, you've seen us expand into many, many different underwriting products over the last four years. We traditionally have been focused mainly on JIA business, Japanese Interest Abroad business as our founding in history back all the way to 1957. With that, we've been entering into many, many new specialty classes of business as listed below. And that diversification in products and services has allowed us to scale the business rapidly. Why many people attribute this growth to? It has really been based on the historical factors that Mr. Morimoto had highlighted to you. It's the foundation of which we're building MSIG USA on, which is the MS&AD brand or which will become the MSIG company in April of next year. It's been built on a strong, strong credit rating. Here in the United States, we are fortunate enough to have an A+ 15 rating. coupled with a global footprint of operating in over 48 jurisdictions around the world. We are, as I highlighted, enhancing our underwriting expertise and discipline on how we look at business, and how we price our business and the services that we provide to our clients. That's all built on as a key pillar is the data and technology platform. We've had remediated our data platform. We have shut down many, many operating systems, and now we all operate off of basically one operating system, which we call our Lighthouse. That integrated platform allows us to share information quickly, enhance our underwriting capabilities and most importantly, work collaboratively across the organization. All of this has helped us be much more focused on our distribution strategy here in the United States. Our distribution strategy is a limited distribution strategy. We trade with 6 retailers and many of the other retailers have to access us through the wholesale channel, which many of you know. The other piece is the implementation and the execution on our transformation on our claims group. Recently, we've hired a new leader in Ron Morrison that has taken over that segment of our business, and we're implementing many new changes on how we operate from an efficiency perspective and a response perspective. That has been mostly focused on once again, the technology platforms that we're enabling. This could not have been accomplished the strong results and change without great leadership and great resources on the human capital side. We've hired many, many new leaders within the group, many of them in key functional areas over the last three years. That number exceeds almost 300 people. This has not just been focused on underwriting or service, but across our distribution platform as well as highlighted around our claims functions as well as key other functional areas such as our CFO, General Counsel and Chief Human Resources Officer. I do believe that the leadership team we have here in place in North America is one of the best in the industry, and I'm very, very, very proud of how we collaborate as a team. Many people ask, your substantial growth, is that continuing? And more importantly, can you sustain that in a different cycle in the insurance market? As you can see across the many different segments that we operate in as well as in channels, there's a huge amount of growth that is able to be obtained for us as we move into new areas of growth and more importantly, disciplined growth. I think that is the most key function as an underwriting company that we need to make sure that we're demonstrating to our clients as well as our brokers is making sure that we're here for the long term. That is an MSIG value. We are built for what I would say, long sustainable client relationships. That is part of our history that Mr. Morimoto spoke of. So as we enter a market or we enter into client relationships, it's always viewed for the long term. So you will not see us exit or enter, and we have a very disciplined approach as we enter new segments of the business. Most recently, we've just announced our launching of our surety practice, which will be focused mostly just on commercial surety, but then expanding into contractors and the like. So as you can see, there's a wide opportunity for us to implement our 56 different products and services into what is the largest insurance market in the world. As Hiro Morimoto highlighted, our growth here in the United States at MSIG USA is significant. We are targeting and aspiring to grow our business to a $5 billion gross written premium company. But most importantly, it's to continue to maintain that level of profitability at a 90% combined ratio. And I'm sure Mr. Morimoto would like us to improve on that as well. But that is our minimal obtainable goal. And this is always going to be focused on one key area, and that is disciplined underwriting, making sure that the traits and attributes of MSIG are demonstrated to our market in a disciplined way. That is meaning making sure that we're sustainable in pricing the business in the terms and conditions that we're offering as well as making sure that we're here for the long term. We will continue to expand our product sets. We will continue to look at new opportunities of growth in the U.S. market. We will continue to enable global expansion of our products across the 48 jurisdictions that we operate in as MSIG and MS&AD. And we look forward to the opportunity to continue to expand our technology and operational efficiencies to maintain that expense discipline as we grow our business and make our business much more scalable, but continuing to focus on operational efficiency and underwriting excellence. Thank you very much for your time this morning.

Good morning. Thank you all for being here. As Wendy said, I'm John Fitzgerald, the CEO of MS Transverse. I've spent a little bit more than 25 years in and around the insurance industry, starting my career in public accounting and then spending the last 15 or so years at a variety of different specialty carriers, the last almost 6 of which have been spent at MS Transverse. I'll begin the talk about MS Transverse by discussing some of the market dynamics that are in play for our business. There are a couple of key phenomenon that initially drew me to the business and then subsequently, the investment from MS&AD into Transverse Insurance Group. First, the growth of the MGA environment in the U.S. has been significant. The slide shows the growth under our tenure within MS&AD. But if you look back over the past decade, managing general agents have grown probably about 3x over the last decade. Specialty underwriting teams have been moving to and forming MGAs to design and manage insurance products on behalf of other carriers without having to hold the risk on their own balance sheet. The model has been very efficient, causing that market to grow from $85 billion at the end of '22 to an estimated $128 billion at the end of last year. Secondly, the advance of the fronting carrier market has been considerable over the same time period. We sit within this fronting carrier market. It's a field characterized by both significant growth of late and significant investment of late. In simple terms, a pure fronting arrangement is a company that issues a policy and then sees the entirety of the risk to a reinsurance partner. In our model, as a hybrid fronting company, we have the ability to maintain some or all of the risk, which we directly underwrite. That segment over the last several years has grown from about $12 billion to $23 billion. If you look back a decade ago, that segment has probably grown about 10x over the same period of time. Within our space, we've established ourselves as a leader. We are the largest hybrid fronting company by gross premium volume, the second largest fronting company overall. We've built one of the best performance track records amongst our peers. And we're now also the 10th largest E&S insurer in the entire United States, sitting alongside well-established companies like Berkshire Hathaway and Chubb in that ranking. Just as importantly, we are the only fronting company in the U.S. with an A+ rating from A.M. Best, and we've climbed steadily from our initial A- rating to the A+ we achieved last year. Our premium volume during this time has grown from less than $0.5 billion for the '22 year to north of $3 billion for the period ended 2025, all while keeping an inception-to-date gross loss ratio of around 45% managing more than 60 programs, 25 MGA relationships and having more than 200 reinsurance partners supporting us. This growth and significant underwriting discipline have earned us wide recognition amongst our peers, including as the Fronting Carrier of the Year for 3 out of the last 5 years. Let's shift the focus to how the business model works. I know fronting isn't brand new for -- it is fairly new for everyone. Think of us as a bridge between two ports. At one port, you have the MGA. They're underwriting specialists in need of sustainable insurance capacity so they can grow their business in a healthy and profitable manner. On the other side, you have the reinsurance community who's looking to underwrite and support that premium that they cannot access directly from the MGA. We sit in the middle on that bridge, managing the direct policies, transforming the data to consumable format that the reinsurers can use to understand and grow their business. We're providing a service to both sides that neither could do on their own. There's three primary features of our business model that make us truly successful. First, our people. As Peter mentioned before, his team has grown significantly, so has ours. When I joined, we were less than 20. Now we're more than 130 people all here in the U.S. we have every function that a traditional insurance carrier we have underwriters, we have program managers, a significant reinsurance team, a full claims team, an actuarial team and so on. We have the depth to oversee every program, even though we do not maintain the majority of the risk. We manage it as if we do. Secondly, we develop aligned interest with our partners. As I mentioned before, we will participate on the risk that we underwrite. Our MGAs also participate in that risk in a variety of different structural ways, keeping ourselves, the MGAs and the reinsurers aligned with a desire for underwriting profitability, not just growth in volume. Third, we work with only the best firms and the best firms want to work with us. They choose us because of our people, our track record, the strong support that we have from our parent organization and the reliable capacity we're bringing into the market. Looking ahead, our growth opportunity contemplates three main focus areas: Certainly expanding the relationships that we have by adding more programs to that mix, adding new high-quality MGA partners and programs from them. Some of our more sophisticated partners are also expanding internationally. There's an opportunity to support those programs internationally emerging. And then last, broadening our reinsurance relationships, ensuring that we have the capability to support the traditional reinsurance model and what is an ever-evolving alternative capital model supporting insurance risks. A major focus area for us in our business model is managing our reinsurance counterparty credit risk. As I previously mentioned, our model depends on managing that direct insurance portfolio and transferring most of the risk to reinsurers. An absolutely critical feature in that trade is the ability of the reinsurance partners to handle their share of the obligation when it comes time to pay a claim. That's paramount to our success. We acknowledge that, and we put a ton of effort upfront and throughout the process to ensure that, that happens. First, we have a rigorous screening of reinsurance partners before we ever enter into a contract or see the risk. Our Reinsurance Security committee approves the amount and level that a partner can participate on every transaction that we do. We look at the appropriateness of collateral arrangements with our actuarial team to ensure that not only do we have sufficient regulatory collateral, but we have an excess above that to ensure that downside scenarios are adequately protected. Third, significant amount of ongoing monitoring. Our reinsurance operations and accounting team, which includes roughly 10 people, along with another 15 who are focused on structuring and placement are engaged with the reinsurers and engaged with the reinsurance broker community at all times, ensuring that the data we've received and reported out aligns with the cash that we received and sent out. That is a critical function for us and will continue to be so. As we look forward, let me share how this all fits into our longer-term vision. MS Transverse operates within an accelerating global MGA market for delegated underwriting. Our growth contributes directly to our parents vision for 2030 to expand overseas earnings. Importantly, our income tends to be primarily fee-based. That means we can generate growth and stable earnings in a model that happens to be less capital intensive than the traditional insurance carrier model. We think that will improve the quality of earnings over time at the group level. Currently, we represent only about 2% of the global market for the kind of MGA underwriting that we support. We see meaningful room to keep growing. Properly executing on this growth will require maintaining the discipline that has got us to this point and aligning with the principles that Mr. Morimoto discussed. Our medium-term priorities are to maintain underwriting quality and strong oversight of our existing MGA partners to grow in the U.S. and consider international expansion contributing directly to our larger parent company organization targets. So what does that growth look like for MS Transverse over the coming years? Having grown the portfolio from scratch to over $3.1 billion thus far in gross written premiums, we are expecting the portfolio can approach about $4.5 billion in 2030. Most of that growth should come from doing business with partners that we're already in business with, but there will be opportunities to expand and add partners, hopefully, multi-program partners over that same period of time. To support this, we expect our partner base to go from around 25 now to north of 30, and we expect that managing about 90 programs at that volume of premium, all while broadening reinsurance relationships to keep them in place and sustainable. Let me leave you with a few key thoughts. The market for delegated underwriting authority continues to grow faster than the broader insurance industry, and fronting is growing right alongside of it. Capturing that growth in a responsible, disciplined way around risk selection, talent onboarding and meeting the operational standards of the best MGAs and reinsurance partners is our focus. We believe MS Transverse is built on exceptional underwriting and credit risk management, and we have the proper foundation to keep executing on this strategy, maintaining our leading position in the market while contributing meaningfully to MS& AG's growth. Thank you very much for your time today.

For now, we're going to move to the Q&A session following our presentation. And before taking any questions from the audience, we do have 5 questions that we've received ahead of time from the analyst and investor community globally. And so we'd like to go ahead and address those. And perhaps through those questions, it will be useful to our listening in-person audience as well. But don't worry, we do have plenty of time for questions. So the first question we have is, how do you plan to continue growing your U.S. business in a soft market environment? And so first, I'd like to ask both Peter and John to comment on that. Go ahead.

It's a wonderful question to speak on. As you saw in my presentation, what we're committed to here at MSIG USA is disciplined underwriting. It's not about scaling the business. It's not about growing the business top line. It's about making sure that we can demonstrate underwriting profit and consistency in the marketplace. With that being said, there is a lot of opportunity in the marketplace as highlighted. And I think there's some areas of focus where we see still enough margin in the business to continue to participate in a meaningful way in certain segments. The U.S. economy is growing significantly, and it's receiving an enormous amount of capital investment in infrastructure, data center builds out as well as other industrial capabilities that need to expand. With that, so many products, so many insurance products can be purchased to help in that infrastructure data center build-out. And that is new risk. It's not cannibalizing existing business. It's actually new product and new product enhancements. So with that, we, at MSIG, think there's a huge opportunity in the construction space, credit space, other lines of insurance that need to procure that -- need to be procured to expand and cover this expansion. It's been highlighted that Japan is investing over $500 billion here into the United States. Many of those companies are existing relationships with us globally, and we look forward to supporting them as they enter the U.S. market or expand into the U.S. market. So with that being said, though, it goes all back to underwriting discipline, underwriting, making sure that our pricing terms and conditions are being met to our goals and objectives. And we do that by strictly monitoring our underwriting function. We look at where the market is in that cycle. And to that end, if we need to, we will make corrections in regards to either limit deployment or terms and conditions to make sure that we're going to be able to continue to maintain that 90% combined ratio. So what I would say in summary, it's about discipline as the market softens in certain areas. It's being sure and making sure that you're focused on what that opportunity is looking like from an opportunity set either in new business or for that matter, as you look at your existing renewal business and making sure that the market understands what you stand for in respect to underwriting appetite and making sure that, that is being consistently demonstrated to your client base. And we will continue to focus and be attentive to this evolving market. And we know how volatile it can be, pricing and terms and conditions. And I think we just need to make sure that we're leaning into the market and not letting the market dictate how our results perform. John?

Thanks, Peter. Very well said. And we largely see the market the same way Peter just described. The nuance for us is we're entirely focused on MGAs. So as we see new opportunities to work with MGAs or on programs that we don't currently support, we're doing a thorough vetting of the economic conditions associated with that market at that time. We have to. There's complete transparency associated with those expected economics between ourselves, the MGA and the reinsurance community when we place a deal. I think that allows us to be eyes wide open when it comes to firming or softening environments associated with a particular program. A program for us can be focused on a specific line, a specific class within a line, a specific geography within a class within a line. There's a level of precision associated with the program business that means isn't necessarily always reflective of broader market conditions. You can have a successful program operating within a softening environment, and we certainly see many of those today.

Thank you very much. The second question we received ahead of time is, what is your underwriting and risk control policy in the United States? And to a certain degree, I believe you might have addressed that in the previous answer, but if you have anything to expand upon on that.

I think the only point I would like to continue to focus on is the discipline, right? And for us here at MSIG USA, we've been focused on making sure that the visibility, the transparency and consistency on how we underwrite is maintained as we manage this cycle. And there's other things that we've done in respects to, as I highlighted in my presentation, around the utilization of data, the utilization of technology, the utilization of how we inform our underwriters to underwrite better during this interesting cycle. And we've implemented certain tools as our digital underwriting workbench allows us to monitor the deployment of our capital, how that deployment is being utilized, but most importantly, how it's performing. And through that, we have a quarterly business review that we do for every line of business. So that what we're trying to do is operate at a heightened sense of awareness so that surprises don't happen. And if there is a trend in one of our lines of business, we can take very quickly corrective action either from a rate perspective, either maybe in regards to limit deployment, capital deployment or maybe it's terms and conditions that need to be addressed in that certain segment or certain line of business in the marketplace. That data, that transparency of our portfolio, I'm very optimistic will allow us to continue to outperform the market. It's information. It's that discipline, as you would expect at MSIG to demonstrate into the market to be a leader. And I'm very confident with our leadership team and our underwriting teams to be able to manage this cycle. We also have appointed a new Chief Risk Officer to make sure that we're in alignment in regards to the risk that we're taking on. And we work very closely with that gentleman Dale James and his team around managing the risk that we're taking on and how that will affect our performance going forward. So the risk culture here at MSIG USA is very disciplined, but most importantly, very transparent to all the risk takers and all of our risk parties within the corporation. So that consistency, that discipline is something we take with great pride and with great purpose as we enter into what is a very dynamic insurance market, as we all know.

Yes. In our world, as I sort of just alluded to, every deal we do has a specific amount of risk associated with an individual policy and an individual event, like in the case of a catastrophe that we're willing to retain. I won't quote the figures publicly, but it's a level of volatility that we're very comfortable with in the context of our stand-alone capital base within the MS Transverse operating companies. So it is very precise and structured for -- in our current case, all of our more than 60 programs. We know exactly what an individual risk loss is going to be and exactly what an event is going to be across the spectrum of possible catastrophes.

Thank you very much. So the third question that we've received from preregistered participants will be, do you have any plans to integrate the U.S. subsidiaries over the medium to long term? And with regard to that, I'd like to invite Mr. Morimoto to respond, please.

Thank you. And the very short answer is no. The two subsidiaries have different business models. Therefore, I believe it's better to maintain them as a separate entities rather than integrate them, allowing us to leverage the strength of each company. That said, we are improving back office efficiency by sharing office space and HR systems, among other initiatives. I believe that the front and underwriting functions should remain separate. Fire home office will provide the necessary support, including capital injection and improvement involvement to prevent friction from arising.

Thank you very much. The fourth question we received is what additional areas of collaboration do you see as potential opportunities going forward? And also, I'd like ask Mr. Morimoto to address this one, please.

Yes. Thank you. I believe these areas of collaboration will be further developed and implemented by the international CXOs, as I mentioned earlier, appointed for each function this year. We have international CXOs for areas such as underwriting, finance, HR, IT, strategy and risk management. And each is currently exploring opportunities for collaboration from group best practices within their respective field. MSH International, which I mentioned earlier, is intended to take this initiative to the next level by further clarifying the authority to the international CXOs. MSH International will lead group-based collaboration across the organization.

Thank you very much. And the final question is, I think, something that many people have asked over the last week or so when we've been out talking with the market, but it's finally what is the balance of organic versus inorganic growth that we can expect in the U.S. business going forward. And for that, I'd like to invite Mr. Funabiki to give us some group level commentary on that issue. Thank you. Mr. Funabiki.

For us, we've invested in the stake of Double Barclays that's been completed. And also MassMutual's affiliate company, Barings investment was also made by us already. Toward FY 2030, our commitment to the capital market in terms of profit level we are actually done in making organic growth to make those profit targets. I would like to take the market that way. And based on the investments that we already made, how we can achieve JPY 1 trillion in organic manner is our focus today. So this is our current phase. Going forward, there will be a step-up in terms of softening of the cycle in the market. So in that cycle, risk margin has to be focused, and that has been built on as well. In addition to that, regarding strategic equity unwinding exercise that is in place today, as I mentioned, part of that will be reclassified as Japanese equity investments and the other part will be used for business investments. How we should think about risk amount? In this current phase, organic growth-driven profit expansion and efforts on capital efficiency enhancement should drive ROE. So in the current phase, this is what we need to focus on and what we need to achieve. So this is the option that we should be taking at the current juncture. And as we are going to see more softening in the cycle, market condition is going to be very different. So at that point of time, in a few years' time, there may be some business investment opportunities to arise. That is our current thinking. So by that time, we have to make sure that we need to be resilient enough. And we will be in a position of highly capital efficient. So that in the next phase, that would provide us with a great opportunity that we can capture. In the previous question, questions concerning North American business was included. So I'd like to touch upon in that aspect as well. NSIG USA's capital allocation increase and Double Barclays investments and also growth of business transfers. By those drivers in North American market, we are able to target middle market, enterprise market and SMEs. We are able to access with different approach. We have secured those avenues. So by working on them, as a next step, what are the areas that where we should approach in the North American market. Within the next few years, we are going to clarify what would be our next area of focus in America and what action we will be taking. That is going to be the next action to be taken probably by way of M&A.

And thank you for everyone from our listening audience who submitted questions in advance. So now we'd like to go ahead and open the floor to questions from those attending in person. If you have a question, please raise your hand. A member of our staff will bring a microphone to you for you to begin speaking. And all questions are welcome. It's a great opportunity to have everyone up here.

Koichi Niwa from UBS. Two questions. First is international strategy overall. Thank you for example with [indiscernible]. But frankly speaking, MS&AD has not always been successful overseas. Now you are again, targeting significant growth, especially in North America. What's the biggest lesson from the past? And more importantly, what have you changed this time? That is the first question. The second one is specific products, data center related. As already Peter mentioned, but a question for both Peter and John on data center for hyperscaler. How big could the opportunity become for your business? And do you have any strong specialty or appetite with this area?