Hello, everyone. Thank you very much for your participation on MS&AD Insurance Group Holdings' first information meeting for the fiscal year 2023. My name is Miyake. I am from the Corporate Communications and Investor Relations Department, and I will be presiding and conducting the proceedings today. I would like to introduce our company staff who are attending today. First of all, today's presenter, Mr. Noriyuki Hara, the President and Group CEO. From your left, Hiroshi Arakawa, Executive Officer responsible for underwriting and reinsurance. Satoru Tamura, Senior Executive Officer and Group CRO. Tetsuji Higuchi, the Executive Vice President and Group CFO. Tamaki Kawate, the Executive Officer responsible for international business. Takuma Hayakawa, Executive Officer responsible for financial services business. Today, we will begin this information meeting with a presentation from Mr. Hara, the President.
With regard to your questions, there will be a Q&A session after the presentation. I would like to move on to the presentation session. Mr. Hara, please.
Hello, everyone. I am Noriyuki Hara, President of MS&AD Holdings. Thank you for taking the time out of your busy schedules to participate in our information meeting. On May, the 8th, the COVID-19 in Japan was downgraded to common infectious disease, and we believe that we are finally starting to regain our daily life from before the pandemic. On the other hand, considering the fact that telecommuting has taken root as a way of working, we are holding this event both in person and remotely, and many people are attending via Zoom in addition to those who came to the venue.
In fiscal 2022, while the effects of the Russian military invasion of Ukraine and COVID-19 remained, large-scale natural catastrophe events such as the June hail disaster centered in the Kanto region, Typhoons 14 and 15, and Hurricane Ian, which hit North America, had a tremendous impact on the lives of many people and business activities of many companies around the world. In addition, the market environment remained unstable, with rising interest rates and falling stock prices worldwide and financial instability in Europe and the United States, and the global economy was shaken by concerns of inflation and economic slowdown. Today's key points are shown on page four. In fiscal year 2022, although profit declined due to the factors I mentioned earlier, group adjusted profit was JPY 172.7 billion against the revised forecast of JPY 170 billion.
As for shareholder returns, the annual dividend will increase by JPY 20 year-on-year to JPY 200. In addition, we decided to purchase up to JPY 20 billion of own shares. Next, I will explain our financial forecast and outlook for fiscal year 2023 onward. In light of changes in the business environment, we have revised our Group profit forecast for 2023 fiscal year to JPY 350 billion, compared to JPY 400 billion target when the medium-term management plan was prepared. However, the effort to strengthen the profitability have made steady progress by taking actions, appropriately responding to changes in the environment. We will not change our quantitative targets for fiscal year 2025, the final year of the management plan. That is to say, IFRS-based net income of JPY 470 billion- JPY 500 billion and adjusted ROE of 10% or more.
Today, I will explain the progress of our efforts to achieve the target profit in fiscal 2025, the final year of the current medium-term management plan, as well as our efforts to sustainably increase corporate value by raising ROE and lowering the capital cost ratio. First, I will provide an overview of our financial results for fiscal 2022. Please take a look at page six. Consolidated net premium written in the non-life insurance business increased by 9% to JPY 3,934.4 billion, mainly due to a significant premium income increases at overseas subsidiaries. Group Adjusted Profit for domestic non-life insurance, overseas subsidiary, and domestic life insurance decreased. But in the second half, we steadily increased profits to JPY 172.7 billion, against the revised forecast of JPY 170 billion. The Group-adjusted ROE was 4.8%, and the ESR that shows financial soundness was 228%.
The annual dividend per share increased by JPY 20 year-on-year to JPY 200. In addition, we decided to repurchase up to JPY 20 billion of own shares. In addition, looking at the ESR level and also liquidity, as well as the stock price levels, taking those comprehensively, we have decided to repurchase our own shares up to JPY 20 billion. Please take a look at page four. The full-year Group Adjusted Profit for fiscal 2022 was JPY 172.7 billion. If the incidental factors are excluded, such as losses related to Russia and Ukraine, losses related to COVID-19, and impact at MS Amlin, which marks its assets to market, it was JPY 253.7 billion.
In addition, we believe there were approximately JPY 56 billion of downside factors that were not transient, such as the impact of inflation, severer natural catastrophes, and an increase in large losses, and we will strengthen measures against these factors in the current fiscal year and beyond. As shown, page eight, the ESR, the measure of financial soundness, was 228% at the end of March 2023, a level that fully meets the lower target range of 180%, even under stress caused by market fluctuations. Next, regarding our shareholder returns, please go to page nine. In our medium-term management plan, the shareholder return policy is to return 50% of the Group Adjusted Profit as a basic return, and after our transition to IFRS in fiscal 2025, it will be 50% of the base profit for shareholder returns.
We will also consider additional returns in light of ESR levels and the business environment as well. We are considering dividends at the 35%-40% level of the Group Adjusted Profit as a guideline, and we expect the annual dividend for fiscal 2023 to be JPY 240. In the second half of this presentation, I would like to talk about the financial forecast and the outlook for fiscal 2023 onwards and corporate value enhancement initiatives. Please go to slide 12.
Here is a breakdown of the JPY 50 billion downward revision we have made for the fiscal 2023 Group Adjusted Profit forecast, together with our recognition of the changes in the environment and countermeasures. We have already taken several actions in fiscal 2022, such as provisions for IBNR. In addition, we will make countermeasures, such as strengthening our measures against large losses, reducing overseas Natural Catastrophe risks, and promoting our One Platform strategy.
By accelerating these initiatives, we will respond appropriately to any environmental changes. Now please go to page 13. Here are the financial forecasts for fiscal 2023 and the factors contributing to profit growth. We expect that some one-time losses from the incidental factors in fiscal 2022 will go away in fiscal 2023, including Russia/Ukraine-related losses of JPY 16 billion and COVID-19-related losses of JPY 52 billion.
In addition, we project profit recoveries by JPY 60.9 billion in the domestic non-life insurance business, mainly due to improved profitability for fire insurance, as well as improvement by JPY 10.2 billion in the domestic life insurance business and JPY 106 billion in international business, mainly due to increase in profits at MS Amlin. Next, I would like to talk about the structure for achieving our quantitative targets. That is IFRS-based net income of JPY 470 billion-JPY 500 billion in fiscal 2025, as the final year of our management plan.
Please go to pages 14 and 15. From 2024, we will promote management resource allocation that balances risk, return, and capital with a focus on international business where profitability has recovered. In fiscal 2025, the profit ratio for the international business will exceed 30%, and by diversifying domestic non-life insurance and domestic life insurance businesses, we will be controlling earnings fluctuations for the period and will continue to earn steadily. In the next part, I would like to explain about some of these profit growth initiatives. You can see on page 17 the overall picture of our efforts to enhance corporate value. We consider our capital cost ratio of group to be around 7%, and here is a conceptual illustration of how we believe we can achieve a stable expansion of equity spreads by improving ROE and by reducing capital cost ratio.
The progress of major strategies in the domestic non-life insurance business is summarized on page 18. Today, as part of our efforts to improve Group ROE, I will update you on the improvements in domestic fire insurance profitability. Please go over to page 20. In fire insurance, profitability is steadily improving, thanks to initiatives such as product enhancements and rate revisions.
Even when the impact of the reinsurance market hardening is taken into account, we expect to turn to profitability in fiscal 2025. In the case of personal fire insurance, the rates that will enable us to secure profits in fiscal 2025 will be applied appropriately in 40% of the policies, and we expect to be able to secure overall profitability as the policy portfolio improves. Next, please take a look at page 21. Large accidents tended to increase in corporate fire insurance in recent years.
In response, we have been taking countermeasures against them and will further strengthen measures such as line size management with profitability, rate increases, review of underwriting conditions. We will work to improve the profitability by preventing accidents, reducing the impact, and supporting recovery through products and services provided both before and after coverage. Next, I would like to talk about reduction in expense ratio as a second point. Please refer to pages 23 and 24. In fiscal year 2022, the combined expense ratio of MSI and ADI was 33.4% as planned. Taking into account the impact of inflation, the forecast for fiscal year 2023 is 33.3%, 0.5 percentage points higher than the previous forecast, but we aim to achieve a level below 31% as soon as possible by increasing insurance premiums through steady rate optimization and reduction of operating expenses.
The cost reduction efforts we've been making since the previous medium-term plan successfully reduced JPY 18 billion in fiscal 2022, compared with the reduction target of JPY 46 billion under the current medium-term plan. As for the One Platform strategy, we have already made progress with integrated management of the head office function and expansion of BPO, and we will continue to make strong progress in the future. The third point is about expanding profits at MS Amlin. Please refer to page 27. In fiscal year 2022, MS Amlin posted a loss mainly due to marking to market its invested assets. However, the company posted a full-year insurance underwriting profit of JPY 10.2 billion in fiscal 2022, mainly due to curbing natural catastrophe risks, improving underwriting conditions for non-cat risks, and increasing underwriting of highly profitable lines.
In fiscal year 2023, we project an insurance underwriting profit of about JPY 26 billion on IFRS17 basis, factoring in additional reserves for uncertain future losses. Together with a rebound from losses in the mark-to-market valuation of assets and increase in interest in dividend income, we now expect a profit contribution to the Group. We will strive to gradually increase profits while improving our underwriting portfolio. The status of AUL, a Lloyd's business, is shown on page 28. The portfolio has been improving well, and we can foresee non-cat loss ratio of 50% or lower. We aim to stabilize and expand profit by the expansion of good loss ratio lines. With respect to natural catastrophe risks, we aim to control risk amount of 10-year return period and aim to increase the underwriting profit when reinsurance market hardens significantly. Next, please look at page 29.
Zurich-based MS Reinsurance has also made significant progress in improving its portfolio and stepped into growing phase. While reducing the amount of volatile natural catastrophe risks, we will promote diversification based on the long relationship with direct insurers. We will expand our underwriting, particularly in agricultural insurance and financial lines, which are highly profitable and effective for risk diversification. Next, I would like to talk about the initiatives for capital cost reduction. Please see page 32.
This slide shows that we are continuing to reduce the risk amount for North American wind and water disasters with 10-year return period. We are working to carefully expand underwriting profit by seizing opportunities in the hardening reinsurance market while controlling natural catastrophe risks. Please now go to page 33. I will talk about the reduction of strategic equity holdings as the second point of our efforts to reduce our capital cost ratio.
In the medium-term management plan, we had originally planned a reduction of JPY 100 billion per year and more than JPY 400 billion reduction over four years, but we have decided to raise the reduction target to JPY 600 billion over the four years. In fiscal 2022, we reduced to JPY 206.6 billion in line with this plan. We will keep this reduction pace in the next medium-term plan, and we will aim to have the balanced value compared to September 2022. If you achieve this target, the ratio to consolidated net assets on the IFRS basis will be approximately 20%. Our group would like to grow together with the society as a platform provider of risk solutions, as we put it in a medium-term management plan subtitle.
For this reason, we will steadily implement the medium-term management plan's basic strategies of value, transformation, and synergy, while responding to changes in the business environment by improving profitability and lowering the capital cost ratio. In fiscal 2022, MS Amlin's profitability has improved. We will steadily increase its profits through a diversified portfolio. With the fiscal 2025 IFRS-based net income of JPY 470 billion- JPY 500 billion and an adjusted ROE of at least 10%, we believe we can continue to provide our shareholders with stable returns. We look forward to your continued understanding and continued support. Thank you.
Thank you, Mr. Hara. Let us move on to Q&A session. If you would like to ask questions, please raise your hand. Thank you. From this hall, Mr. Muraki of SMBC Nikko Securities. Mr. Muraki-san, please.
Muraki is my name, from SMBC Nikko. I have two questions relating to international business and also domestic business as well. First of all, starting with the international business. Receiving the numbers, I would like to ask additional questions as well. I am referring to page 14, which shows fiscal 2023 and 2024, and it compares between JPY 124 billion to JPY 140 billion. So there is increase of JPY 140 billion. Aioi's international business shows a JPY 9 billion increase in Transverse, JPY 1 billion international life insurance, JPY 3 billion, and Amlin only JPY 4 billion. So those are the expected increase in profits.
Starting in the fiscal year and for the next two years, the change in the profit increase, those numbers represent the accurate profit increase figures? Let me just confirm that. That is the first question. The second question relates to the domestic business efficiency, and I am referring to page 23. As shown on that page, inflation is taken into consideration, and also the consumption tax increase was conducted, and therefore, there has been some delay in the expense ratio reduction, I believe, in progress therein.
What I would like to ask is the following. It relates to a longer-term perspective. Ten years ago, you announced the function-based reorganization. Currently, you are now implementing One Platform strategy. I think that succeeds the function-based reorganization. Thus far, you had two major non-life insurance companies side by side while pursuing higher efficiency. So I would like you to take a stock of that strategy.
Also, through only those measures in fiscal 2026, are you sure that the expense ratio could be below 32%? Beyond that, even below 31%. What is the certainty with which you think you can achieve those targets? How confident are you? Secondly, it was also mentioned in the past meetings that you always mentioned that you have not excluded the possibility. Do you have any consideration about the further reorganization or restructuring, including merger of these two non-life companies? If there is any change in your thinking, I would like you to share that with us. Both overseas and domestic business.
Thank you very much for your question. Two questions. First, about the international business. We would like to know the breakdown of profit increase by different segments. Mr. Kawate will respond to that question first of all.
Thank you very much. Kawate speaking. Thank you for your question. With respect to the breakdown, Mr. Muraki, you are quite right, as mentioned in your question. Especially with respect to Amlin in 2023, between JPY 48 billion, and in 2025 it is going to be JPY 52 billion. So between 2023 and 2025, the increase is JPY 4 billion. With respect to 2023, last year, 2022, we had various incidental factors, and those factors are going to disappear. Therefore, I think there is quite a high certainty that those target of 2023 can be achieved. But we have not attained the target in the past several years.
Therefore, we would first of all like to confirm the achievement of 2023 before moving on to 2025. On the full year basis, we confirmed various local subsidiaries and its achievements, and especially in the Lloyd's business. Lloyd's head office, The Lloyd's Corporation, needs to approve the business plan of AUL. Therefore, AUL seems to be quite bullish about its plan. But in terms of consolidated plan, we took a rather constrained view of that. Therefore, this also means that there is quite an upside for that. That is all.
At the midpoint, in terms of the current situation of this year, and also whether it is going to be actually approved by The Lloyd's Corporation, it could be revised upwards. That is how I would like you to understand the situation. Can we move to interest business?
Yes, I did understand Amlin, but from a different perspective, for Aioi's number, the number for Aioi on page 64, Toyota Retail business is showing the positive profit, although in a delayed manner. But how are you going to achieve that? The profit of JPY 14 billion, can that really be generated by Aioi's profit increase? In terms of confidence, compared with your confidence about Amlin's achievement, it could be just the opposite of that. How confident are you?
With respect to Toyota Retail business, Mr. Tamura will respond to that. Also, about inward reinsurance from overseas, Arakawa will respond to that.
Tamura speaking. As you correctly pointed out, on page 64, it refers to Toyota Retail, and for 2025, a rather substantial figure is shown for the improvement in profit for Toyota Retail. From medium-term plan, and also there has not been any change from the very beginning about the medium-term plan, especially with respect to European business. In the past, it only covered new vehicles, but new countries are included, and also the vehicles on the road are also included. Therefore, through those means, plan was formulated. However, for fiscal 2022, as you can see, those numbers in Europe, it was really a very struggling business performance there.
In Europe, all of a sudden, loss deteriorated after COVID and traffic improved or traffic increased, and that had already been incorporated as an expectation. At the same time, something that we had not seen in the past, that is to say, the bodily injury, large losses occurred, more than one. Also, the theft, especially of Lexus luxury cars, increased rather significantly, and this applies in Japan as well. Therefore, for 2022, the achievement was quite difficult. We know why the losses increased, and countermeasures had already been introduced and been implemented. Therefore, it may be a while before the benefits can be enjoyed, probably not within 2023, but we expect to see benefits from those measures. Also, we are discontinuing high-loss businesses.
For theft, on a permanent basis, we introduced a secondary or second immobilizer had been distributed to customers. Therefore, this is 100% successful in preventing the theft. Collaborating with Toyota, the new components are going to be incorporated to the vehicles, which also addresses this theft. This will start being installed quite risk in the future. Therefore, we intend to be able to achieve this target, which is the initial plan. Other than Europe, China and Australia are major markets, and they're generating profit as we had expected. Right now, the steady progress is being made. For moving toward fiscal 2025, I believe the recovery can be achieved as we are planning right now. That's all.
Now with respect to inward reinsurance from overseas is the next point. As you see here, for 2022, the final premium income and also adjusted profit is shown here. The profit, positive profit, is attained. That's one important topic. As is mentioned at the very outset to the slide, last year, we had Hurricane Ian. That was a huge one. But we reduced the coverage of U.S. flood and storm damage, and that resulted in what you see here.
For fiscal 2023, for the protection coverage, we are now ready to offer that. So up to a certain level, even if the natural disaster could occur to a certain extent, we now have the line which allows us to retain the positive profit. We are aiming to benefit from the hardening of the market while maintaining the risk coverage as well. So we intend to continue this business. That's all. Thank you.
The next question regarding expense ratio. Question about expense ratio. The effects of initiatives and also the effects of merger. Higuchi, if you would like to respond to that question.
Thank you very much for that question. Fiscal 2023, there was a restructuring initiative started. In this restructuring process, growth and efficiency was pursued at the same time. That was the objective, and that was the strategy. How did it turn out in terms of growth? The two insurance companies, we have two insurers. Both of these companies, they were able to grow very strongly in terms of their top line. The two companies have continued to sell products, and that has contributed to growth in the top line. In terms of efficiency.
Reduction of JPY 50 billion of expenses. However, there was improved or even more effectiveness in terms of reducing expenses. In terms of the improved efficiencies, we were able to follow through on our objective of efficiency. In the restructuring process, there were some things that we were not able to follow through. That is the integration of some of our products, and the lost payment services department. The integration of that department also needed to be done. However, we have been able to decrease expenses by more than JPY 10 billion by integrating the organizations and also the platform for payment of losses. The platform has not come to a final form yet, but we are in the process of integration of the system. MS is using the new system, and in 2025, AD will start using the new system.
That would also promote the further efficiency of our systems. In restructuring, what we have aimed for had been implemented steadily. On top of that, we have this One Platform strategy that we are undertaking. There are some remaining portions that needs to be integrated, especially the head office functions need to be unified as One Platform. Also some routine activities can be outsourced as a BPO. That is the kind of efficiency-related activities that can still be performed. We are selling our products with the two insurers. But we want to retain this structure, at the same time we want to differentiate between the two, and we have already determined how to do it. Otherwise, we will be integrating the operations so that we will be able to increase further efficiencies, and also especially in the head office functions.
We will like to further pursue efficiencies. Regarding the merger process. Oh, before that, 31.9% achievement on that part. Yes, we would like to follow through on that. That is our plan. The expenses reductions, JPY 46 billion is the target, and 39% progress have been made. JPY 46 billion reduction is the target, but it has been done faster than planned. By fiscal 2025, 31.9% achievement, we are confident will be achieved. Then for the pros and cons of the merger, as we have been saying all along, we have not changed our position. The option of a merger is something that we are always looking at. Currently, the biggest impact of a merger is the impact on the top line. I was earlier talking about growth with the two insurers, and we have been able to achieve growth.
Now, if this could be one insurer, there is a need to adjust the share. There may be a negative impact on the top line in a significant way. That is one challenge that needs to be overcome. Because of these factors, the combined ratio is in the 90%, the mid or lower 90%. We want to grow the top line, and by doing so, we will eventually be able to improve our bottom line and also the enterprise value. Currently in this restructuring, as an extension of a restructuring plan, we would like to continue to further pursue efficiencies. That is to say that we will continue to have this option of a merger or an M&A. If ever we are going to have another M&A, there may be some negative aspects. We are not considering that there will be any negative element in that.
I think M&A is an option that we can always choose.
Thank you very much for that response.
Thank you.
Thank you very much, Muraki-san. Next, Watanabe-san of Daiwa Securities. Watanabe-san, please.
Daiwa Securities, Watanabe. I have two questions as well. The first question relates to shareholder return. On page seven of the materials for fiscal 2022, you cited two factors for fiscal 2022. In terms of the total shareholder return for fiscal 2022, instead of JPY 309.7 billion, you used JPY 253 billion instead. Could you also explain the reason why? There may be some influence from natural catastrophes, so please respond to that. With respect to the shareholder return, based upon the request coming from the Tokyo Stock Exchange, what sort of discussion did you have on that? Please share that with us. The automobile insurance pricing on page 19, you are expecting to see a profit increase for fiscal 2025. Do you think a price increase is not necessary to attain that?
Page 20, fire insurance, you are expecting to make fire insurance to become positive. What is the likely combined ratio for fire insurance? What is your profit level considering the change in the advisory risk premium for that line?
Two questions. Thank you for your questions. We received two questions. First one relates to the shareholder return and your question specifically related to page seven, the reason behind using this JPY 253.7 billion as a basis. The companies below PBR over one was requested by Tokyo Stock Exchange to improve the situation. What sort of internal discussion took place over the question? Higuchi-san will respond to that.
With respect to the shareholder return, our shareholder return policy is to pay 50% of Group Adjusted Profit in both by cash dividend as well as a share buyback, combining both two. That is the basic policy.
In that regard, for the current fiscal year, the starting point for return for the shareholder return is the Group Adjusted Profit of JPY 172.7 billion. 50% of that would mean between JPY 80 billion- JPY 85 billion. That is the 50% of that. With respect to the expectation for dividend per share, that is JPY 200. That total, JPY 170 billion. Already it exceeds JPY 85 billion of the 50%. In terms of the excess part, as shown on the right-hand side of this page, we have described there that we will take into account or consider the potential additional returns. This would reflect the additional return that we are offering or distributing. We will retain our forecast for dividends, so JPY 170 billion is unchanged. What sort of approach are we going to take about share repurchase?
On that particular point, there are several factors which were taken into account comprehensively. Namely, the situation of stock price, as far as we are concerned. As was described earlier, our share level is below PBR of one time, and therefore we need to see this. We also look at ESR. Currently, ESR stands at 228%, so it is within the target range, but it is on the higher end of the range itself. Therefore, on that point as well, to a certain extent, some adjustment or reconsideration could be made. We need to consider some adjustment on that as well. That is the second point. In addition to that, we have been continuing from the past, the total shareholder return level, and we have continued to expand the total shareholder return over the years. That is described on page 95.
This shows the trend of total shareholder return from the past. For fiscal 2021, toward the end of that, it exceeded that range significantly. This one year may be a rather special case. But looking at the total amount of shareholder return over the past years, it has continued to increase, and we consider that continued increase as well. 2025 is JPY 125 billion. Therefore, exceeding that level is one of the factors that we considered. Out of those factors I have just mentioned, vis-à-vis the basic return, we did take into account the potential addition to that, and we wanted to show that based upon track record. That is one of the considerations. In addition to that, it took into consideration the stock price level, ESR situation, and also the trend of total shareholder return over the years, and also the liquidity on hand.
All of those factors were taken into account, which led to our decision to buy back our own shares up to JPY 20 billion. At the board meeting, with respect to basic policy, we received the approval or consent to that basic policy by the board. On that basis, we now live in the world in which environment is changing rather rapidly. We had to take into account the balance with other stakeholders. That was a point raised at the board meeting. For example, wage increase for employees, whether wage increase is adequate or not, and also the agents who are also a stakeholder of the company, what sort of actions can be taken vis-à-vis customers? What should be the approach that we should be taking?
While those elements are taken into consideration, the shareholder return should be well-balanced. Those were the discussions that took place in the BOD meeting. That is all from me.
The PBR of one time, less than that, we are fully conscious of that. But as I mentioned today, we will continue to increase ROE by increasing profit. As we do that, while we increase profit, we will increase ROE, and we intend to exceed PBR of one time or higher. Let us move on to the second question. Regarding Non-life in Japan, automotive and fire insurance prices, especially the combined ratio for fire, what is the combined ratio that we are assuming? Arakawa-san would like to respond.
Thank you. Regarding automotive insurance, we are now going to raise the prices. If you look at page 19, as you see on the very top, this is a correlation between the frequency and the price. In 2019, it is a basis and it is coming down. But if you look at the unit price in green, you can see that it is going up. Even before 2019, the unit price had been increasing between 2017 to 2020, there is an increase of about 20%, and that trend continues. That is because of the higher functionality of the automobiles.
However, the frequency of the accidents, there is increased safety features in automobile and also less traffic due to COVID-19, has resulted in lower frequencies. The index is slightly over 100%. If you look at the correlation between the two elements, the revisions of the price is something that we can consider, that is quite obvious, I think.
Also for fire insurance, last year, last fiscal year, as is stated here, there were large losses and NatCat losses over the previous year. There was a major significance and that is why we were not able to achieve our target. There are the non-NatCat losses, for example, there was a good improvement based on our initiatives, and the policy portfolio is increasing or improving. Overall, the situation is going for the better. We want to reduce the non-NatCat losses, but the large losses should go back to its normal level. By doing so, by fiscal 2025, we will be able to turn to profit. That is the general target that we have. After we overcome that, then we would like to reach the combined ratio that we are targeting for.
Thank you. Now for fire insurance, other insurers, I think the ratios are less than 90%, but what do you think is the optimum level?
I am sorry, I do not have optimum level for me as a combined ratio.
Thank you.
As was just mentioned by Arakawa-san, fiscal 2025, the fire insurance, we would like to turn into profitability. Of course, the capital cost, even if taking into account the capital cost, we would want to be profitable. That is what we are aiming for. It may be in the next medium term period, but we would like to achieve that.
Okay, thank you very much.
Thank you, Watanabe-san. Next, from JP Morgan. Mr. Sato, please.
I am Sato from JP Morgan Securities. Two questions. Number one, as was mentioned, the Non-life in Japan. I would like to ask a question from a different perspective. Last year, you set out your medium plan, and compared to then, you are looking at the profit for fiscal 2023 in Non-life, that is page 13. Primarily, the domestic Non-life coming down. I think there was a decline of about JPY 60 billion, if you just look at the Non-life in Japan.
Fiscal 2025, the final year of the medium-term plan, the reduction is only by JPY 15 billion. There is inflation and other elements that are contributing to this. These are factors that are very structural, so it could still remain at that time. In a medium-term plan, if you implement the plan, then just to get the results, I think the downside could still be remaining. Do you think there are new initiatives to retain this downside of JPY 15 billion? What are the measures that you are factoring in?
Do you have any effective measures or initiatives that you are having in mind? The rates, I think, is something that you could possibly consider, but it is not explicitly factored into this. How else are you going to catch up to achieve these goals? My question number two, page 17. You have shown on page 17 the capital costs, 7% is a CAPM derived level. Other non-life groups also are looking at the same level. For your company, the valuation, like Group Adjusted Profit in the market cap, its multiple is about seven. The implied capital cost is probably a little bit higher than that. Simply, what is your view on that particular point?
Also, if capital cost that is required is actually higher, then you should also increase ROE, but to fundamentally reduce your capital cost, you have to consider measures for that. On the right-hand side, you do have measures for reducing your capital cost. Those are generic ones, but there are things that you may have to focus on primarily. What do you think will be the measures to reduce capital costs like AIG did to fundamentally revisit your portfolio? Is that a possibility? I do want to know your views on this.
Thank you very much for that question. First question was about the Japanese non-life insurance. Fiscal 2023, down by JPY 60 billion and then 2025, JPY 15 billion down. We are going to improve during this midterm plan period. How are we going to achieve it? That's your question. Arakawa, I would like to respond to the first part of your question.
Thank you. Some additional measures that we are envisioning, also in fiscal 2022, final figures could have an impact. But the top-line plans could be changed. For example, the casualty lines, the SMEs would have risks, so we need to hedge for the risks. The plan or the numbers in the plan could be changed. For automotive, we would like to also expand the area where the telematics are implemented. That's another measure that we are also adding. Also for the rates, it's not explicitly included, but we do have some tentative numbers included in the plan. It's probably not the final numbers, but we do have some quantitative or numbers included in the plan, although it's tentative.
Furthermore, in terms of rate adjustment for both motor automobile and the fire insurance, we factored in that possibility. Although when is not decided specifically, but the price adjustment is incorporated for both motor and fire insurance lines. In addition to that, with respect to page 12, various measures are shown described there for fiscal 2022, when the books are closed for that. To a certain extent, for the results for fiscal 2023, some reserves are established. For example, the provisioning for IBNR for inflation, not just international business, but domestic business, we incorporated that. Also the IBNR provisioning for casualty insurance is incorporated, and also for the first year business profit, we incorporated that for 2022. That could be drawn down for fiscal 2023. Those are the measures which have already been taken for fiscal 2023.
For large losses, we have been taking measures for the past few years, which has been intensified gradually. To a certain extent, in that sense, the large losses that we had incurred in the past, we analyzed where those losses occurred, what sort of industrial sectors, and what sort of risks were the sources of losses. We analyzed those, and we reviewed and we changed underwriting those areas. In the past, the discount was the major causes. But even if the accidents didn't occur, if a specific industrial sector was prone to accidents, we reconsidered, changed the conditions, and also changed the rate as well as line size. That is to say the amount of underwriting was revised. Those are the concrete measures we have taken. Fire insurance is a rather short-tail business, so we believe through those measures, those large losses could stabilize further going forward.
For casualty large losses, which are primarily liability. In this area, the past losses tend to increase substantially, but improvement measures have been incorporated. At the same time, the liability tend to be a rather long tail. The losses occurred in the past year could linger on. Taking into account, we have taken some reserves for fiscal 2023 as well. This is not specifically for non-life business domestically, but for foreign bonds, we now have a higher hedge cost. Therefore we are selling those foreign bonds in fiscal 2023 so that the hedge cost could be reduced. Including those
Those measures had been taken in fiscal 2023 to prepare for fiscal 2023. That is my response to your first question. The second question relating to the cost of capital, judging from the capitalization, the actual cost of capital could be higher. Not just those measures described here, more fundamental measures may be required. Mr. Higuchi will respond to that question.
About the cost of capital ratio, the assumptions used there, first of all, 7%, which is shown here. As you correctly pointed out, we derived this figure from CAPM. The 7% was derived from the CAPM. We are confirming whether that is applicable or not periodically, and in the most recent period, I believe 7% is valid. You have implied that the cost of capital ratio implied by the market is higher, and we have the similar consideration and awareness of that.
We believe it is very important to continue with our efforts to cost of capital ratio. Your point is quite right. We consider this to be a very important challenge that we really need to address seriously, too. The cost of capital of our company, why is it high? One of the factors behind that is due to the volatility of a profit, especially the international business. The profit volatility, especially of our international business, was quite high. This is one of the factors behind the high cost of capital ratio. Secondly, the weight of strategically held equities is quite large. Because of the market volatility, our net asset value tend to change. Therefore, this is one of the challenges that we need to address, and we are fully aware of that. The third point is as follows.
We have taken countermeasures and the implementation has been completed. Specifically, this relates to major life insurers in Japan, and the mismatch of sensitivity between liabilities and assets for interest rate. Domestic life insurers consider that to be important factor behind the high cost of capital. We have the same awareness as well. Therefore, what do we do to address that particular characteristics? For one thing, focusing on international business, we are trying to restrict volatility of profit. Several questions have been raised on this particular point at long last, centering on MS Amlin, we now have the structure which enables the more stable generation of a profit. On this particular point, we do not have actual track record that we can show you to demonstrate that the volatility of profit, especially international business, has been contained.
I think it is very important for us to be able to present to you the track record of that. At the same time, the natural catastrophe risk was another factor causing volatility of profit. As we have shown you on the slide, specifically page 32, the overseas natural catastrophe risk, as shown on this page, is being reduced significantly. This should start generating positive benefits or effect. On the life insurance, the mismatch of sensitivity to interest rate change was quite significant. But in the past few years, we have completed various measures to address that significantly. Therefore, currently, I believe that particular point, the problem was resolved. As you gain more in-depth understanding of the situation, I think that factor could be duly recognized. The third point relates to the strategically held equities, and this continues to be the challenge.
We are aware of that, and we will continue to believe that this strategically held share is one of the top risks for the company. Since we are fully aware of that, as we explained earlier, as shown on page 33, in the medium-term plan, our target was to reduce JPY 400 billion. But compared with that, we are accelerating our efforts to reduce that to achieve JPY 600 billion reduction. If that is continued for the next medium-term plan for another four years, I believe the strategically held equities will be halved from the current level. So through those measures, we intend to reduce cost of capital steadily, and we believe we can do that. Thank you very much.
About the revisiting of your business portfolio, can you talk to that? I think in the past, you have made some minor changes, but I think you tend to have some holdings and then you struggle. That is the image I have about what you have been doing. Do you have any views on that?
Yes, if I may. The business portfolio. Rather than reducing the cost of capital ratio, ROE increase is something that is very important. We have the holdings and then we struggle, as you pointed out. As a result of the struggling, we now see some hope and results, that is MS Amlin, b ecause.
Basically speaking, the ratio of cost of capital should be outperformed by the returns. That is what we are asking the businesses to perform. Also, there is the aspect of strategic importance. For each of the businesses that we have in the portfolio, we would like to have a long-term perspective and set goals over the long term. As for our exit strategy, of course, we do bear that in mind in some cases. But as we have stated in the past, we are still looking at how the individual businesses will turn out, so I will refrain from making any specific comments. But the restructuring of our business portfolio is important, we understand. Within Japan, there is a business with the nursing homes. We have exited from that business. We do have experiences of withdrawing from some businesses.
We will be identifying the situation of the business one at a time. As was mentioned by Higuchi-san, we do talk to the CEOs of our businesses, and they have this higher consciousness on ROE. So by when would they be able to achieve 10%? They have plans to achieve that, so they have this higher awareness on ROE. I would like to take that into account when we consider our business portfolio.
Thank you.
Thank you, Mr. Sato. I would like to now open the floor to the Zoom online participants. From Mitsubishi UFJ Morgan Stanley, Tsujino-san. Tsujino-san, please. I would like to just change your status to panelist, so please unmute and turn your camera on before you start. If I may, I hope you can hear me.
Yes. Thank you. Regarding shareholder returns, so basic returns plus alpha. The dividend part, how are you going to increase the dividend payments? You are going to increase the dividend payment from JPY 200 to JPY 240, but in the future, if the policy is 50% of the adjusted profits. But the dividend part, if the profits increase, then is it going to increase, or are you going to set a target, the increment, and then return?
For additional returns to shareholders, I think ESR levels and the share prices will be taken into account, you said. So when is that going to be triggered? I still do not understand when this will happen. I think on the additional shareholder returns, is it going to be done on a regular basis? If you have any specific ideas, could you tell us how you plan to do it? That was my first question. Could you respond to this first question first?
Did you not hear me? I hear no response.
Sorry. Thank you. I hope you can hear me.
Y es.
So how are we going to increase our dividend payments? Are we going to have a specific increment of increase, or what is the policy behind dividends, and also any other explicit mention of shareholder returns? Okay. Higuchi would like to respond.
Yes. Thank you very much for that question. For dividend payments, for us, the adjusted group profit, or 50% of the group profit, will be returned. As a payout ratio, 35%-40%. That is the level that we use as a guidance. We increase profits and also want to increase that level of our dividend payment payout ratio. The group-adjusted profits is expected to grow, as we have shown.
In line with the growth in profits, the payout ratio would be somewhere between 35%-40% as we pay out our dividends. That is our basic policy. The repurchase of our own shares. The differential of 10%-15% is the range in which we will be repurchasing our own shares. But additional shareholder return is additional, so depending on the situation at the time, we would like to be flexible in making judgments as to whether to pursue it or not. That is all for me.
Thank you very much. I think this is the important point. This time it is JPY 20 billion of repurchase. ESR and the share price is the basis. Maybe next year, this time of the year, maybe the share price and the multiples may be improved, but still, it may be low in level. The ESR may be probably the same level. If that is the situation next year in the financial market, if the financial market is not in confusions, then you will be able to provide a stable increase in dividends.
This is hypothetical, so it is hard to respond to, but I did talk about our policy already, as Higuchi-san mentioned. For us, as we have always been saying, we want to maintain this increased dividend trend. So fiscal 2023, JPY 240 is our plan, and in the following year, we want to continue to increase our dividend payments. I do hope that you understand that is our position.
Thank you very much. One more simple question. It is complex. Page 23. This familiar cost reduction measures. On the right-hand side, the large systems will be improved. In fiscal 2024, the depreciation is coming down. This cost here is decreasing. You may be able to cut costs, but there are some other elements. Maybe the cost is not going to come down overall. Also, you talk about the additional reductions, and I do not understand the relation.
I n fiscal 2023 to fiscal 2024, if you read this diagram, how much increase would there be? Because of inflation, maybe you have to pay more salary. That is probably a different allocation. For fiscal 2024, fiscal 2025, can you elaborate on the breakdown of what you are going to do?
The reduction of expense ratio, I think, is what you are asking. Fiscal 2024, fiscal 2025, how much are we going to reduce? There are investments in large systems, but any other factors that would push it up?
Yes.
You want to know how much we intend to reduce. Tamura, would like to respond to that question.
Thank you very much. Fiscal 2024 to 2025, the expense, we will be reducing the expenses as planned in a medium-term plan, and we will execute it, and then the personnel costs will be reduced. Also for DX, digital transformation, digitalization, will be improved efficiencies, so that would also reduce costs. I do not have any specific numbers with me right now, but for the numbers, I would like to respond to you separately if there is an opportunity to talk to you. That is all from me. Thank you.
Okay. Thank you very much.
We will come back to you later individually. Thank you very much.
Thank you very much.
Thank you, Tsujino-san, for your question. Moving on to those people in the hall, Majima-san of T okyo Tokai Securities.
I'm Majima, Tokai Tokyo Research Center. One question relates to your life insurance subsidiary, Primary Life. As the interest rate increase, financial situation tends to appear very poor. Probably the net assets may decrease to one half maybe, but since the company is engaged in variable annuity, the liability also decreases, so in terms of the payment, there is no problem. As interest rate continues to increase, MS Primary Life, in the case of this company, gradually, do you intend to increase capital as looking at the situation? MS Aioi Life is the fixed insurance company, and therefore, the financial conditions might be quite different. Merging these two subsidiaries, is that one of the options?
This Primary Life is a joint venture company, and therefore, can you ever think of exiting from that business? Probably you may not be able to respond to that. What is your approach and thinking in terms of the life insurance subsidiary as interest rate continues to rise? Another question relates to non-life business. When Funabiki-san was in charge of this, he often talked about cultivating new customers who have not been captured by existing agents or existing networks. He was talking about the insurance products embedded to other approaches, other companies sometimes offering those embedded products by joining hands with a realtor, for example. Could you respond to those two questions?
Thank you for your question. Your first question relates to your life insurance subsidiary, especially under the rising interest rate environment, the financial conditions of life insurance subsidiary. Based upon that, what is our approach to those life insurance subsidiary, including the possibility of a merger? Higuchi-san will respond to that.
This Primary Life, it's not in joint venture, but it's wholly owned subsidiary. We own 100% of this subsidiary. In terms of the interest rate change or fluctuation, because of the change in the interest rate, of course, net asset is affected by that, as you correctly pointed out in your question. However, looking at the current situation of the business, so long as that business continues, the company is not in a situation where the capital increase in the form of capital injection is required. The MS Primary Life and also Mitsui Sumitomo Aioi, and you referred to the possibility of merging these two. These two companies are engaged in totally different form of a business.
In the case of MS Primary Life, its business is mainly variable annuity. It offers that, but in addition to that, it also offers fixed whole life insurance, and that's the mainstay of its business. Variable annuity business is only maybe 10% or so of a portfolio of this figure. It may not be completely accurate, but around 10%. It also specializes in over-the-counter sale of banks or financial institutions. The products the Primary Life offers is assets formation or assets building products. On the other hand, in the case of Mitsui Sumitomo Aioi Life, its focus is on cross-selling life insurance policies through non-life agents, offering medical care insurance or nursing care insurance. Those protection-oriented insurance products are distributed and offered. Even if these two companies are merged, the benefits of merger is very difficult to come by.
They also have rather different risk profile. Therefore, these two businesses need to be continued through different entities, I believe. By doing so, I think there will be a better contribution to the enhancement of corporate value of the entire group. That is how I think of this Primary Life. That's all.
This Primary Life is engaged in different currency denominated currencies. Of course, with the U.S. interest rate increases, the company is affected by that, but it is not affected by Japanese interest rates. Last year, the U.S. interest rate increased. Therefore, it had to add to, or increase the level premium for those companies for this business. For page 25, the total profit of both of these two life insurance subsidiaries are shown combined. Starting in 2025, this level of a profit has been generated.
Last year, there has been some increase in COVID-related losses, but excluding that, at least we can hope to generate this sort of a profit from Primary Life. So we would like to continue strengthening that. The second point relates to your non-life business. Joining hands with the platform operators, how are we distributing embedded-type products? Arakawa-san will respond to that.
The insurance products distributed by embedding them into the e-commerce is pursued, and there are different types of that. Some few weeks ago, we issued a new release showing mobile battery protection offering of insurance and joining hands with mobile battery offerers. When there are natural disasters, we would provide those to evacuation centers so that the evacuees could use those batteries. This might be somewhat different, but we are trying to expand the products distributed to e-commerce product.
For embedding them, it requires development of IT system as well. So the basis for decision for investment is whether there is a strong need for that. So we are generating various ideas and discussing with potential partners in this area. So we do think that is very important.
In many different areas, we are pursuing those embedded-type products, and some are under consideration, as Arakawa-san has just mentioned. So that is how it stands at this moment. Did we respond to the question?
Thank you, Mr. Majima. From UBS Securities, Okada-san, please.
Thank you. I am Okada from UBS Securities. I have two questions. Number one, once again, on page nine, this additional shareholder returns and the items that you have listed here. If you cannot execute the efficient growth. So, if you can share with us the situation of us considering efficient growth, and also if you think that the efficiency is improved. So, if there is a need for ROE, like maybe JPY 20 billion in fiscal 2022, was the number that you had. So, what do you have in mind when you say this on this page?
Also, additional point about the MS Amlin performance or the plan for Amlin, the hardening of the insurance business, how do you factor that in? Also going forward in two or three years' time, the reinsurance Business. Where in the cycle of reinsurance business would they be in two years' time, three years' time?
Thank you very much for that question. The first question is about additional shareholder returns. If there's no efficient growth investments and also ROE. We are going to raise ROE. It says, when deemed necessary, so when do you deem it necessary? That's the question, right?
Yes. Thank you very much.
For the investments in the businesses, we look at the market environments. Namely, first of all, North America, the specialty insurance companies, these large size companies, the valuation level is relatively high still. It is a rather difficult situation. That's our understanding. However, last year, Transverse investment was executed and MGA market that is growing in North America. So investment in that market, MGA market. Also in Silicon Valley, we have a corporate venture capital.
Venture capital type investments in startups that's smaller in scale. We would like to continue to explore opportunities. For startup investments, Silicon Valley Bank went bankrupt, and some of the funds have withdrawn. We believe that it is an opportunity to make investments in quality assets. We continue to be prudent, but we are willing to make some moves if possible. Also in Asia, if you look at Asia, we are always looking for opportunities, and in Asia, the investment opportunities are not so abundant. But we do also continue to monitor the situation, and we do find that there are some opportunities here in Asia. Also, when you say if we find that we need to improve the efficiency of our capitals. There are various cases that we have in mind. For example, the efficiency of the capital.
If we cannot achieve our targets, then we have to make some decisions to do something. That's one option. But in the long term, we have been repurchasing our own shares, so we will continue to do so to gradually improve our capital efficiencies. That is one additional factor. We are looking at it from various perspectives, and I think there are opportunities in various areas.
Thank you very much.
As for the second question about the performance of Amlin and the hardening of our reinsurance, and how much are we factoring in the increase in rates and also the cycle of reinsurance, the hardening and softening. So where in the cycle would we be in? Hara-san would like to respond.
Thank you very much. Yes. For Amlin, in general, the increase in rates, in fiscal 2022, it was 14% or 15% increase in rates was executed. For NatCat, it was higher in percentage. But overall, the rates were increased by 14%, 15%. Then in fiscal 2023, Amlin overall had about 10% increase in rates. That was the plan. That is the plan for fiscal 2023, 10%. But in January 2023, as we have published, we have been able to increase the rates far above that level. Also in June, July in North America, the wind and storm disasters, just like January, the hardening still is occurring. So not as much confusion in the market in January, but the situation is still very hard or tough.
For fiscal 2023, the 10% that we have factored in in our plan, I think it is going to be higher than that 10% level. Beyond next fiscal year, we will look at whether there will be major natural catastrophes this year or any other incidents occur. But so far, the new reinsurance establishment that we saw in the past or the incoming capacity into the capital markets, there is nothing that is impacting the supply-demand situation in the market.
At this rate, beyond fiscal 2024, there may be some fluctuations, but I think this hardening phase will continue. That is the perspective by the market. Fiscal 2024, 2025, the rate level is going to remain flat. We have a conservative plan for Amlin. This hardening situation will continue. But then if it starts to soften beyond next year, the plan will remain flat. That is the plan.
Okay. Thank you very much.
Thank you, Mr. Okada. I think we are moving very close to the scheduled conclusion time. I would like to entertain one more question before concluding this Q&A session. Anybody wishing to ask a question? Anybody with a question? In the hall, Niwa-san of Citigroup Securities. Niwa-san of Citigroup Securities, please.
Niwa of Citi. I have two questions. One relates to ROE and the other one relates to asset management or investment. I am looking at page 14, ROE to exceed 10% stably, that was the long-term plan that you have. It may be quite offensive, especially comparing that against the global peers. I would like you to assess that considerational plan.
External environment is quite good, and therefore, 20% of ROE tends to be quite commonplace. Compared with that, is your target aggressive enough or ambitious enough? 10% seems to be quite realistic or 20% could be the average of the industrial role. What is your view on that? Could you comment on that, please? That is the first question. The second question relates to the investment activities. The external environment, including interest rate, is rising. It may be temporary, but stock market performance seems to be pretty good. With that in the background, your investment policy appears to be rather conservative. There seems to be some room for taking risks there. Is there any such room for greater risks? Or because you have been quite conservative, there is no such room for taking greater risks.
In terms of capital or amount of risk you have taken, there seems to be some room for taking further risks in the investment area. What is your view on that? What is the approach for taking investment risks?
Thank you for your questions. First question related to ROE. Compared with the global peers, our target level may be quite reserved. That seems to be your view. We could be more ambitious, that seems to be your view, maybe as implied in your question. I would like Higuchi-san to respond to that question.
Yes. In terms of a perspective of ROE, looking at the insurance business and looking at the ROE from the investment business perspective, around 12%, I believe, represents one yardstick that we can consider. That is our view.
Aiming at higher ROE needed to be targeted, and to achieve that or to have a higher target, what do we need to do? That's something that we constantly think about, and we need to pursue that at all times. In terms of ROE improvement, as you pointed out in your question, we consider that to be a very important topic. As for how we can achieve that higher ROE, we will continue to work on that as an important topic and challenge for us. We would like to continue considering that and promote our implementation of that. Currently, ROE is below 10%. First objective is to achieve 10% stably and exceed that. For the current year, it is around 12%. Achieving that, we would like to move on to the higher level, the next level.
As Kawate-san explaining, the profit improvement at Amlin has made significant progress. I believe elements that allows us to increase ROE are in place. We need to make sure that that is going to be the case. We will continue to work on improving our ROE.
The second question related to investment, we could take greater risks to increase returns. That seems to be the opinion of the questioner. Hayakawa-san will respond to that.
Yes. Hayakawa is my name. Thank you for your question. In terms of asset management, the basis of our strategy is shown here. For one thing, the financial soundness need to be maintained at all times. In terms of the specifics of that, in terms of the matching of an insurance with an insurance liability, and also the liquidity risk need to be considered and managed quite properly. Those are important factors.
On that basis, based upon individual company's decision, they are allowed to take risks. That is the basic policy for overall group investment strategy. While keeping financial soundness, investment to aim at higher upside is actually implemented. In that sense, when taking higher risks, aiming at upside of that, there is another criteria that we need to satisfy. That is to say, we need to have the proper foundation that allows us to do that. That is like the constitution of the entire group. Each company within the group is following that. More recently, domestically in Japan, we did not have many substantial investment opportunities, so upside was pursued outside of Japan.
On the common basis for the entire group, we have been trying to lay and build the foundation for such greater risk for investment activities in page 30 describes that structure that we use. Basically speaking, private equity, the private assets, those private assets are areas in which individual companies within a group have made investments. Especially the MS have the track record of investing in private assets. They do have talent in that area. Initially, we seconded people to establish a company in New York. The company is called MSR . Last year and this year, different companies seconded people to work in those local entities, and therefore, they are seeking upside by having those people locally stationed. That is how we are addressing this. That is all from my response.
With respect to the investment in asset management, taking a little bit more risk to increase return has been something that we have been pursuing already, and we are taking initiatives in this area. In the case of Mitsui Sumitomo Insurance, the Alpha project is pursued, and different types of assets are invested by us to increase returns. I would like to ask Hayakawa-san to make some additional explanation of that.
Alpha project is a project that is pursued by Mitsui Sumitomo Insurance on its own as an independent company, taking overseas credit risk as well as private asset risks. Rather boldly in this project, those risks are taken, and the preparations have been underway in the past few years, and it is implemented under the current medium-term plan. More specifically, it has borne fruit in the form of MSR. That is a subsidiary.
We are increasing investment into private assets and also credit investment overseas are being increased through this, and that is the policy that this company is working on right now. Since we now have this vehicle that we can use for investments, various companies within the group that had been investing in different asset classes overseas, and they had been wanting to increase those investment overseas. Now that we have realized those individual companies are doing that, since we have this platform established in the context of Alpha projects, this vehicle is going to be used by different companies within the group. Earlier, I did not mention that for the overall investment activities, you implied in your question that maybe we are not taking proactively the investment risks.
We have taken risks in terms of strategic equity holdings, and therefore, if you add that risk, it is not that we have light risk exposure in investment activities.
Thank you, Mr. Niwa, for your question. This concludes the Q&A session. This concludes the first information meeting for fiscal 2023 by MS&AD Insurance Group Holdings. Thank you indeed for your participation.