Good afternoon, everyone. It's a great pleasure to welcome you to Tokio Marine's London Investor Day. My name is Simon Spatonle, and I'll be serving as your moderator for this meeting today. On behalf of all Tokio Marine representatives, we highly appreciate your attendance today, both physically and via the webcast. Please note today's conference will be recorded and will be uploaded on Tokio Marine's website.
Now let me confirm whether everyone has a presentation in front of them titled, Tokio Marine Presents Annual Investor Day in London. All right. This year, the Tokio Marine leadership team, led by Group CEO Masa Koike, will provide you with the opportunity to further understand the international business, Japan P&C business, and the solutions business of Tokio Marine Group. During the session today, we will have simultaneous interpretation system. You can hear English on channel one and Japanese on channel two.
For investors on the webcast, you can choose your preferred language on the registration site. Regarding today's meeting, we'll start off with summary presentations on each business, followed by the opportunity for Q&A. We intend to conclude the meeting by 4:30 P.M. today. Now, please kindly let me introduce the attendees from the Tokio Marine Group. I'm happy to introduce from Tokio Marine Holdings, Masa Koike, President, Group CEO, and Group CCO. Donald Sherman, President and CEO of Delphi Financial Group and Group Co-CIO. Kit Yamamoto, Co-Head of International Business.
Yoshi Endo, Group CFO. Susan Rivera, CEO of TMHCC and Group Co-CRSO. Brad Irick, Co-Head of International Business. John Glomb, President and CEO of Philadelphia Insurance Company. Hiroaki Shirota, Head of Japan Business, and Matthew Shaw, CEO of Tokio Marine Kiln. Without further ado, I'd like to hand the meeting over to Group CEO, Mr. Koike.
All right. It's my first exposure to our European investors, so really appreciate the opportunity to be here today and have this opportunity to speak with you. I'll start off with a group overview and then pass it on to each business segment. So if you can turn it over to page three . When I took over the Group CEO role, I was very keen on making sure that I preserved the core feature of Tokio Marine Group, and that was that we remain a very purpose-driven company. So, to be there for our customers and society in their times of need, that's really the core ethos of what really bonds us together as a group. We've evolved from being a Japanese leading P&C insurer to a global insurance with a Japanese heritage.
We started in 2002 by establishing a company called Tokio Marine & Re, which is a company we've since sold off. But post that, we were able to welcome in additional members to the Tokio Marine family through M&As. Here we are where the profit composition of our entire group was more like 95/5 Japan International to a 35/65 composition. So you can definitely sort of sense the amount of international growth that we've been able to achieve over those years. We're now at a real interesting standpoint from an evolution perspective and what I can describe to our group members as phase III, where all three business units, Japan insurance, international insurance, and now the newly established solutions unit, which is non-insurance activities that provide a further repertoire of services from a risk management perspective.
All of it is in a very interesting phase of evolution, so that is one of the reasons why I am describing it as phase III. We just announced Aspiration 2035 as our midterm goal, which I will get into later on in further detail. If you can turn over to page four. When we talk about how we manage our group companies, a lot of people describe us as a so-called federated model, which means that we try and seek an optimal balance between decentralization or local autonomy and the group collaboration.
So each group company's management is expected and has the determination to autonomously drive their individual growth with a strong ownership and accountability. They are encouraged to leverage group capabilities, be it best practices or be it a bigger balance sheet. But one important thing to note is that this is never forced, right? The holdings would provide recommendations as to how each individual group company might benefit from being part of the Tokio Marine Group, but ultimately, it is a group company's choice.
We think that aspect is very important because, again, we would expect that each group company will take full ownership and accountability of the individual choices that they make. This has worked especially well for us, where you can see on the right-hand side of page four that group companies' growth has exceeded their market peers post joining Tokio Marine. If you can turn to page five. Here I describe what I just called Aspiration 2035, which is our goal guidepost for the next decade. The reason why I was incentivized to formulate this was we had our North Star, which is our purpose, and then we had our midterm plan, which is our one-to-three-year financial goals.
We really had nothing in between. When all three business units are under a very interesting phase of its respective evolution, I wanted to make sure that I encourage our employees to think mid to long-term about where we would want to be as a group, where each individual company would want to be, and then calibrate backwards, and think about what each group company needed to do in the next one to three years. That was the incentive behind it. The important aspect of our Aspiration 2035 is the point that I just mentioned, us remaining a very purpose-driven company. I have also described that we would clearly want to have three sources of competitive advantage: underwriting and investment as per the past, and solutions as a newly established competitive advantage. We would also want to geographically diversify further.
I am not here to preach the right or wrong of what the politicians do, but at the same time, the geopolitical uncertainty is something that we have to take for granted. So, in order to make Tokio Marine's ecosystem more resilient to changes, I think the geographical diversification, the priority of it, has never been higher. Oh, sorry. That is the qualitative aspect of where we want to be. But at the same time, from a quantitative perspective, we said, all right, so in 10 years time, we would want to double our value creation being the net income. That is an aspirational goal that is very, very hard to achieve by organic growth alone, which strongly indicates that we would want to welcome in additional members to the Tokio Marine family.
At the same time, we would want to be more capital efficient. Therefore, we've aspired that we would want to bring our adjusted ROE from the current 13% to 17% to bring us on par with our global peers. If you can turn to page six, I'll talk about the Berkshire Hathaway Group strategic partnership. We struck a deal and announced it in March. This was actually independent of the Aspiration 2035. The Aspiration 2035 came first, and then the Berkshire Hathaway partnership happened to tag along at the very tail end. The reason why we did this was because this will allow us to really focus on mid to long-term value creation. It's a three-pillar partnership, strategic equity investment by Berkshire, us seeding out a whole account quota share to them, and then potential collaboration on future M&As.
It needed to be a three-way package for us to be legitimately interested in striking this deal. The investment aspect we think is a very strong validation that a company of Berkshire's caliber has confidence in our capabilities to continue delivering value. The whole account quota share will provide us with very stable reinsurance capacity over a long-term basis. Again, another attractive feature of the partnership.
The last but not least, the strategic potential collaboration on future M&As would obviously allow us to leverage Berkshire's balance sheet together with our ability to successfully integrate strong business models into the family. We're very excited to continue discussing with Berkshire as to how this will pan out. There's nothing really firm at this point in time, but we will no doubt be in active discussions on a going-forward basis. If you can turn to page seven.
This describes our business portfolio on a global basis. Again, roughly 35% Japan, 65% international from a profit distribution perspective. We've built, we feel, nice group companies at each regional level that possesses clear competitive advantage that is tailored to its market characteristics. As a result of that, we've been able to achieve profit growth, outperforming the market. I will now hand it over to Kit to present. Well, details of this will presented by each business owners and CEO, but now I'll turn it over to Kit to provide an overview on the international business.
Okay. Thank you, Masa. Good afternoon, everyone. My name is Kit Yamamoto, Co-Head of International Business. What I'm going to do today is to present a brief overview of our North American business, which accounts for a big portion of our international business. I'm going to cover both underwriting and investment. Later, my colleagues sitting aside me will provide you with more details on how each individual companies, including TMK, which is not domiciled in North America, but earns a big portion of its business there, are performing, and how they see the current market environment in their respective focus areas. Turning to slide eight, I will start from underwriting. As you can see here, our North American underwriting has delivered consistent growth outperforming peers across both soft and hard market cycles.
The line chart on the left-hand side of the slide shows that our underwriting profit, indicated by the orange line, has expanded by over 5.4 times over the past decade, significantly exceeding the 3.6 times growth of our peers, shown in purple. You can also see that this outperformance is particularly pronounced during soft market phase. This strong performance is underpinned by several competitive advantages of each of our North American companies that we have developed over time. First is our deep expertise in specialty lines, combined with highly specialized and loyal distribution. We carefully select risks and flexibly adjust terms and pricing as needed. Maintaining a disciplined underwriting strategy, a so-called bottom focus approach. This is complemented by the close and timely communication with our distribution partners, which we always make sure to maintain.
Second is our well-diversified portfolio, illustrated by the pie chart on the right-hand side of the slide. Our group companies have developed this portfolio over more than 20 years by continuously expanding into new lines of business. It now consists of more than 100 lines with limited correlation across them. This helps to minimize earnings volatility and offset the impact of individual rate cycles.
Thirdly, our disciplined execution of high-quality bolt-on M&As has also contributed to the expansion of underwriting profit. Our group companies carefully assess opportunities based on how those can help complementing and expanding our existing business, and also on whether those could be smoothly integrated into our operations post merger. Of course, our portfolio is not immune to rate cycles. However, supported by these strengths, we aim to continuously deliver profit growth that outpaces our peers, even if the market further softens.
Now, please turn to slide nine, and I am going to now talk about investment. As we have done so on underwriting, we have been consistently generating stable and high returns on investment by leveraging long-term predictable insurance liabilities, taking advantage of Delphi's strengths in investments. On this slide, we break the investment income growth down into two components, asset under management and yield. Asset under management, shown in the center, has expanded at a CAGR of approximately 10%, supported by abundant cash inflow generated by strong underwriting performance. Turning to the right-hand side of the slide, income yield has also been consistently maintained at a level approximately 100 to 200 basis points above the market benchmark, underpinned by Delphi's strengths in investment, which you will hear from Don later.
While the investment environment remains uncertain, we will continue to closely monitor market trends and capture profit growth opportunities going forward. Before I finish my presentation, let me touch briefly on other regions. While today I focused on our North American business, we have also established competitive advantages aligned with local market characteristics across regions such as Europe, Brazil, and Asia. On TMK, Matthew will speak later on how they are doing. Across the globe, the strength of our business lies in the ability of each company to leverage its unique strengths while also combining them to maximize the group's overall potential. With that said, I will now hand over to Brad, my fellow co-head of International Business, who will cover our group's M&A strategy, and this will be followed by each CEO's presentations covering the updates of respective group companies. Brad, please.
Use this one. Here we go. All right. We're good. I'm Brad, Co-Head of the International Business. As many of you know, we have a proven M&A track record underpinned by stringent acquisition criteria. Our five large-scale international acquisitions since 2008, most of which we're really pleased to have represented here today, have resulted in a return on investment of 27.3%, far exceeding our cost of capital.
As Masa mentioned earlier, this business has also grown substantially since our acquisition, bringing significant profit synergies. At the same time, a disciplined approach also requires considering an exit when a business is no longer meeting our business objectives. The slide shows five businesses exited since 2019. Building on our track record, we will continue to actively consider new acquisition opportunities.
However, we maintain the fundamental principle that M&A is a means to achieve sustainable growth, not an end in itself. Based on this principle, we will pursue acquisitions with discipline, guided by three critical criteria: cultural fit with our company, a strong differentiated business model, and high profitability. This mindset underlies our success today and will not change. With that, I'm going to pass it over to John.
Thank you, Brad. On PHLY, very proud of what we've been able to build in the upper left-hand corner. A very diverse portfolio. Some are subject to the softening in the rate market that we're experiencing, and more than half of them are not as subject to. There are six areas that are identified here. The other gratifying thing is that the other segment that now makes up 11% of our gross written premium is surety, farm, and agriculture, and our E&S operations, which sum total to about $450 million of premium. All of those divisions have started over the last decade. In the bottom left-hand corner, we have a fanatical focus on customer service. It is our belief that the carriers that will rise to the top are the ones that are the easiest to do business with.
Over the last decade, we've been focused on Net Promoter Score as a metric to really gauge. It's not only taking surveys from our employees, but from our agents and our end policyholders. Over the last decade, we've grown that Net Promoter Score with a deliberate focus to the high 60s, which is best in class for the specialty insurance market. Moving to the center of the page, our current focus.
Late last year, in October, we made the largest acquisition in PHLY's history, a $615 million acquisition of a collector vehicle book of business. This was four brands that had been consolidated by, actually, a local MGA in Philadelphia, roughly just under $200 million in premium. This is a segment that, through our relationship with the James A. Grundy Agency, a 20-year relationship, PHLY already had an interest and an excitement towards.
We have about $100 million of this business already. What we've been working very hard to do is to get all of the filings completed and approved in all 50 states, as well as programmed. That business will start rolling to Philadelphia in earnest in early 2027. But so far, everything's on track and very excited about that team and the cultural fit that Brad was talking about. They're just a great fit for PHLY. In the middle of the page, steady profit growth. We continue to focus on achieving not only rate increases that exceed that of our peers in the industry but also exceed loss costs. Loss costs we pick with the help of our actuaries at 6.25%. Our goal is to exceed that again this year, as we have since 2018. So far, so good.
We also continue, starting in 2019 in earnest, to manage our limits to make sure that we are reducing the capacity that we're providing on the general liability side. Case in point, in 2019, we had a little over 2,500 policies that had greater than $10 million in liability limits. We have now two policies that are greater than 10, and in both those cases, we actually purchased facultative reinsurance. On the bottom of the slide in the center, I referenced the tiering of our products. What we did about a decade ago, a little over a decade ago, was we simply took Tier 1, 2, and 3. Tier 3 was the business that we really weren't achieving the returns that we expected, and we really tried to grow new business and retain renewals in Tier 1 and 2.
Over that time, Tier 3 has been reduced from about 20% of our total portfolio to about 2% of our portfolio. So that is by design. But what I'm really excited about is that 2026 is the first year where we didn't really have a product that was in need of significant underwriting corrective action, and we started the year really being deeply committed to every single one of our products across our more than JPY 5 billion of premium.
On the right side, just taking a look back at where we've come over the last five years. It just shows that we've continued to outpace our peers on the rate side, and obviously, that compounding effect has really exacerbated so that when we looked at 2025 and the beginning of 2026, we're very happy about the adequacy of the pricing of our portfolio. You notice right under the rate, the renewal retention. In 2023, 2024, and 2025, we underwent a corrective action plan to attack policies that were susceptible to severe convective storm in the Midwest.
We saw a deliberate drop in our revenue retention. I expect that now that that is essentially done, we will start seeing, and that has been the case in 2026 here, that we'll start seeing that pick up despite the softening of the market to the 2021 and 2022 levels. Finally, it shows all the effects of the compounding rate on rate on rate and the impact on our combined ratio in the bottom right-hand corner relative to the U.S. P&C market average. With that, I will pass it to Don.
Thank you, John. On page 12, you can see in the upper left-hand pie chart the product mix that we have at Delphi. The non-life in the blue and green shades, the life in the orange and yellow shades are relatively balanced. What these insurance products have in common is, number one, they are all wage driven. We think ultimately, if you believe in the long-term success of the U.S. economy, it will over time show up in wages, and we like having wage-driven premium that gives us an edge on some potential for built-in premium increases.
Number two, what they all have in common is they do not carry catastrophic risk. I will come back to that when I talk about the investment portfolio. Number three, what they have in common is a lack of correlation with one another, other than the wage-driven aspect. They also tend to have this duration element to it. Not only are they not catastrophically driven claims, but they tend to have a longer duration and a relatively predictable payoff pattern.
What that allows us to do is own a portfolio that shows us the best long-term spread return for risk by being able to look at the less off the run, I should say the more off the run, the less on the run kinds of structured securities. You will see in our investment portfolio a large component of structured products and a large component of whole loan products. We have matched our liquidity profiles to the extent where we have a very ample supply of liquidity to handle variations in premium collections and claims payments, but still have the opportunity to maximize the return on the portfolio.
That has been the long-term view for Delphi, is find a longer-term insurance coverage, look for the best off-the-run opportunities in the investment market, and see to it that you make money on both sides. We try to return an investment return that beats the general market averages. We also try to achieve a combined ratio that is better than our underwritten expected losses, our underwriters expect loss. We want to make money on both elements of the business. When you talk about the current focus, I mentioned we want to try to achieve claims results that exceed what our underwriters expected as a loss ratio. Right now, the investment markets are a little stingy in the opportunities they are giving us. We still see opportunity. There is some element for growth.
We think now is the time to focus on further extracting value out of how we can do a better job managing claims and help our customers avoid claims. We have a number of projects going with AI and other tools to try to expand what we can do in both how we handle claims appropriately and what that can do to help accelerate the process of our investment team finding new investments. We think now is the time to stay close to the knitting as opposed to feeling like now is the time to fill your sails with wind and see how fast your boat can go. That is our environment. We are working to mitigate the potential impact of falling rates on our investment portfolio.
Many of the good attractive spread products come in variable rate formats, and we have a higher than most of our peer variable rate component in the portfolio, and we are working to mitigate that. I think we are doing that successfully and I look forward to being able to report on that in the future. On the far right-hand side, you can see the results of the combined ratio. We feel like we have done a good job mitigating those issues and maximizing our opportunities there, although we think there is still good news to come. On the far right-hand side in the lower level, you can see the results of the investment strategy and focus that I just mentioned. With that, I will turn this over to Susan.
Thank you, Don. Good afternoon, everyone. I am Susan Rivera, CEO of Tokio Marine HCC. To remind you, Tokio Marine HCC is the specialty company within the group. We are headquartered out of Houston Texas. So when you look at it, though, we are a global leader in specialty insurance. We have been doing it for over 50 years. When we talk about global, about two-thirds of our business is written within the U.S. and about one-third outside the U.S. So if you look at the left-hand side, we basically are a diversified portfolio of truly niche product. We write over $8 billion in gross written premium. If you think about some of the larger product lines in the U.S., we do that with no workers' comp, no commercial auto. So it gives you an idea of what we write.
We really have been built on acquisitions and also organic, bringing teams on board to build out specialty offerings. So when you look at the left-hand side, the product composition, we do have a diversified portfolio that really does not correlate up and down entirely with the property and casualty insurance industry market trends. So if you look, about 53% of our business does not correlate at all. We are a big writer of medical stop loss in the U.S. That is actually about one-third of our gross written premium business. We are a big writer of crop as well as surety. So those do not correlate. If you look in the middle side, I thought I would talk a little bit about our latest bolt-on M&A.
We bought Agrihedge in January of 2026 this year, and that acquisition really goes hand in hand with the phase III initiative across the group to build out our solutions business. So when you look at Agrihedge, they basically are a tech-enabled risk management firm that helps businesses manage the financial risk of fluctuating commodity prices. We have been working with Agrihedge in our crop insurance underwriting unit for about six years now, so we know the company very well. We know leadership very well, and really w ith clients are livestock producers, grain companies, farming operations, and they provide a full range of consulting, brokerage, and insurance services. So it really endears the client to Tokio Marine HCC to be able to offer insurance offerings as well as this commodity risk valuation fluctuation solution.
We're excited to bring them on board, and they've been in business for over 25 years and founded in 1999. If you look at the current focus in the middle at the bottom, we like to always show our consistent track record of profitability. When you look at this chart, the place from where you want to be is up and to the right. If you're up and to the right, you have the lowest combined ratio with the lowest volatility.
I think it's our diversified product offering, where we're not overweight in any one product, really allows us to achieve these results. On the right-hand side, when you look at the results, we show our compounded annual growth rate from 2021 to 2025. Really over this last hard market cycle, we've been very successful in expanding our business line via organic and inorganic growth.
We had some new specialty expansions. We bought GCube, which was the renewable energy company. We bought a cyber underwriting company, MGA, in the U.S. Then we also were able to attract great teams to expand out our marine and energy offering, marine liability. We've expanded into European surety by attracting great talent that has deep technical expertise. Really excited about our ability to continue to bring talent on board here.
If you look at the bottom right-hand side, it shows our combined ratio versus the U.S. P&C market average. Across the long call, we try to target an 88% combined ratio at Tokio Marine HCC. That's based on our current portfolio mix of short-tail and long-tail liability. You can see our diversified portfolio, our deep technical expertise, our strategic reinsurance purchases all help us to deliver that result. With that, I'm going to hand it over to Matthew Shaw to talk about Kiln.
Thank you, Susan. Good afternoon, everybody. Tokio Marine Kiln is one of the largest, longest standing Lloyd's businesses acquired by TM in 2008. Really, if you focus on the center paragraphs, the strategy five to six years ago was really about rebalancing the portfolio, reducing volatility. Back then, the portfolio was very heavily property. It was about 70% property. Really the plan was then to add product and increase existing product around the property product and dilute the amount of overall property, which I think we did successfully. It now represents about 40% of the portfolio. It's about the same scale as it was, because actually property's been very good to us for the last few years, but we've grown the other products and added products around that.
Then about two years ago, we started introducing a new strategy, and this was really in reaction to what we were seeing in the London specialty market. That strategy is really about building leadership capabilities in all of our lines of business. We currently lead in the subscription market about two-thirds of the business we write, but the plan is that we should be leading north of 80%. So that strategy is about people and talent, bringing underwriting talent in the lines that we're not so strong in, data and analytics, making sure we're equipping our underwriting community with the right information to make fast, informed decisions, and also operational efficiency, trying to have the right systems and analytics, and systems to be able to operate efficiently. And really part of that strategy is about broker facilitation.
And in the London market, we've seen a real growth in broker facilitation over the last few years, and that's really both in whole, like an Aon Client Treaty, whole account facilitation, and in mono line facilitation as well. The reason that we really want to position ourselves as a lead market is all of those facilities still need a strong leader. They need a strong leader to set rates, to set terms and conditions, but probably most importantly, to have a very strong claims team.
And we're fortunate that we have an award-winning claims team. So we think we are in a position to be a strong leader in all of those lines of business. Obviously, the London market at the moment is becoming more challenging. It is an environment that is softening. So the real focus for us at the moment is about rate adequacy and underwriting discipline. With that, I want to pass the mic down.
Hi, everyone. Now I would like to explain Japan P&C business. In the Japan P&C market, the top three players occupy about 90% of market. The resulting profit is very stable. Within this market, over the long term, we have continued to show a profit several percent higher than our Japanese peers. Next, on growth. As shown on the right of the slide, Japan has historically stable growth. Recently, it has entered a hardening phase driven by inflation, a positive trend when compared to Europe and the U.S. Japanese population is declining, but Japanese corporates are expected to continue growing. Their growth will support the expansion of the commercial insurance market. In particular, specialty insurance penetration in Japan is low. This offers an attractive market with sustainable growth potential.
In the Japan P&C market, which continues to grow with stable profitability, the key question is where is the competitive advantage? Please turn to the next page. In the past, the Japanese market was unique because of practices like cross shareholdings among corporates. These practices are unwinding. More customers will select insurers based only on their insurance capabilities. Here, the strength of underwriting is key. Our company has superior capabilities to our peers in both corporate and individual segments. In the corporate segment, our key strength is our ability to offer leading products. Even for complex risks that require high expertise, we are supported by the group's global underwriting knowhow. In personal lines, while inflation is increasing loss costs, we have been able to raise rates flexibly without reducing renewal rates, supported by strong agent customer relationships.
Our underwriting strength has allowed us to grow in the past and will continue to be a critical competitive advantage as we capture opportunities in the expanding specialty market. Going forward, on top of these initiatives, we will leverage the enhanced stable capacity from our partnership with Berkshire, so we can take disciplined risks in new and growing areas. That concludes my presentation. Next, Koike-san will explain our solution business. Thank you.
All right. Thank you, Shirota-san. If you could kindly turn to page 17. What we define as solutions is outlined in the middle, where we aspire to provide a more holistic risk management service solutions, being loss prevention or loss control pre-loss, and then if in an unfortunate event of a loss, early recovery or robust rebuild. We've been talking to our investors about our desire to expand since probably the early 2020s, and we were very happy to welcome ID&E into our family last May.
Just reminding everybody that ID&E is a company that provides risk management consultancy services to property owners. It allows property owners to think about how they can enhance their property's resilience against natural catastrophe exposures like flood, windstorm, and quake. Packaging this with property insurance would provide us with the capability to provide comprehensive risk management solutions.
We've been in discussions with the Japanese domestic clients. The initial feedback has been overwhelmingly positive. The hard bit has been to ensure that the clients have sufficient budget for this, so it's going to be an educational process. That being said, the initial feedback that we've been receiving from our customers strongly indicate that we should be able to provide additional revenue for future growth.
In this solutions business model, we initially looked into disaster prevention. We'd also like to look into areas like healthcare, cybersecurity, and any additional ones that would come our way. We're really, really excited that we've got ID&E as a core platform. Just like Tokio Marine Kiln was sort of like an accelerator to our international growth, we consider that this would be a core company that would be able to firmly establish solutions unit as a core contributor to the entire group.
So that concludes the entire presentation of who we are and where we stand today. Before turning it over to the Q&A session, I would like to reiterate that we really appreciate and are aware of the importance of maintaining an open and constructive communication channel with our shareholders and investors. We do value your honest and constructive feedback to our strategy. With that, I would like to open it up for questions and answers.
Great. Mr. Koike and senior leadership team, thank you very much for the presentations. With that, we would like to open up the floor to questions. Just a few things to keep in mind though, please. As we would like to provide each investor and sell side analyst an opportunity to ask questions, we ask that each of you, each turn, ask a maximum of two questions. Please raise your hand physically or tap the Raise Hand button for those on the webcast. We will start with questions from the room. Just one other thing to keep in mind, if you could please make sure you speak all your questions into the microphone so the interpreter can hear you. With that, we will open it up to the floor. Rob?
Thank you. Two questions. The first one for Susan, I think. The medical stop loss business has been a real problem for many people in the U.S. Can you just talk us through how much you have raised rates, and are you looking to take share as other peers have struggled? The second one is on page 16, the Japan business. There is a logic to bringing international products to Japan, but how do you get it to work internally? Why would somebody come write cyber in London or New York? What is the incentive for them to come to Japan? Are you flying people in or are you training people in Japan? How is it going to work, and how will we see the profitability? Thanks.
Yes. On the medical stop loss business, this has been a core line of Tokio Marine HCC's really since inception. I think to be successful in that line of business, obviously, you need to get rate increases every year. We have been getting rate increases every year. Currently, we are probably north of 22% effective rate increase, much higher than we would have needed in the past few years. We were prepared for this. We had been talking about the COVID catch-up crush. Once COVID hit, results were very good for the stop loss industry because people couldn't go and get their basic services, and we knew there was going to be a crush, so we were anticipating this for a few years now. We are again lower 22%. We think it's going to continue into next year as well.
We are seeing significant top-line growth because of that rate, but it's necessary rate, so it's not necessarily falling to the bottom line. It's basically going to increase losses. Recall, right now, we attach on average about at $150,000. The employer will keep the first $150,000 of every loss. What we are seeing is an increasing amount of severity losses. We do buy reinsurance protection on this line of business as well. Again, it just comes to underwriting discipline, forecasting the medical inflation trend, and making sure that you stick together on that rate increase.
The other competitive advantage we have at Tokio Marine HCC by writing almost $3 billion of this, our expense ratio and our ability to be able to look at our trends and our data is much more credible and effective and gives us that scale and the low expense ratio that other people can't generate. Our target combined ratio on this to meet our return is 95% because we can write at three to one. Post-COVID, we were writing more around 88 to 90. Last year, we were about 95.2%. This year, we think we'll hit our target or better again. Some of that extra profit margin that we were enjoying after COVID is gone, and we need to continue to push rate to hold that around 95.
All right. The second question will be answered by Shirota-san, but just to make sure that I got your question correct, the question was about how we export the technical capabilities of our U.S. companies onto the Japan platform, right? Okay.
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All right, great. Thank you. We're going to move on to one question that has been asked on the Zoom. Does the Berkshire partnership open up new potential targets because of their willingness to take on risk businesses that perhaps Tokio Marine doesn't find desirable, i.e., catastrophe, reinsurance, et cetera? Or is the list largely the same and the partnership just allows you to do more than one deal? For Tokio Marine, what are the most desirable lines you want to get bigger in the U.S.?
All right. I'll let you take that one, Brad, initially.
Happy to take it. I think the thing to focus on from the front with the Berkshire transaction, and you'll see it in some of my comments, is our philosophy around M&A and the types of companies and the types of risks that we would take on has not changed. That was really, I think, the real benefit of the Berkshire, I'd say, validation of our approach. They really like the way we look at culture and cultural fit and how important that is to us.
They like the track record that we have in transactions. I think it would be a little strange if we now changed our approach. I think you can take that as really the focus. I would say for Berkshire to come to us and say, "Now we think you should think of this," though is not really the way this partnership has developed. Hopefully that helps with that question.
On the question in the North, I think it was North America, whether or not there were specific lines of business. I think really the focus in North America is that we like the lines of business that we're in currently. You heard Susan talk about that, John talk about that also with Kiln and Delphi. I think we'd really look to that more like we've done in the last years, bolt-on acquisitions, so enhancing existing lines of business, potentially adding to some new approaches to that with the collector car business that John's done.
I would say there's not really a focus on this line of business that we really need to go at more. But as we look at our individual group companies, we'd look to them to say, "Here's something where we feel like we're maybe underrepresented" and we'd look for an acquisition. That would be typically a bolt-on type acquisition. I hope I have answered the question.
Yes, I think it is important for everybody to note that even if we actually do partner up with Berkshire for future M&As, we will treat it as if it is 100% acquisition by us, right?
Yeah.
Great. We will turn it back to the floor. Matthew?
Thanks very much. Two questions, if I may. First of all, if I look at the combined ratio for a number of these businesses that you have just gone through, many of them you were well ahead of the peers, but in many situations you are now sort of more in line with the market. I guess with your scale and diversification, does that give you potential over the longer term to actually reestablish a bit more of a leadership position on those combined ratios?
The second question would be, and perhaps you can use the medical stop loss example that you gave earlier. You have done better than the market. You have been ahead of the market, and one of that was the using of the data and the trends and being one step ahead. Is that different data that you use, or is it the same data that everyone else has, but it's just how you've interpreted it and the conservatism with which you've done that? And does that advantage erode a little bit when AI comes in and everyone can use AI combined with the same data that you have? Thank you.
Thank you. For the combined ratio advantage, I'll let maybe John and Matthew take that, and then the second question obviously is directed at you, Susan.
Great. Thank you. Yes, the answer is it does allow us to have a little more conservatism. Social inflation is something that's been talked about a lot in the industry. 2019, 2020, 2021, 2022 snuck up on people. Loss cost inflation ended up exceeding by a wide margin what most companies, most of our peers, including ourselves, expected to be social inflation and what lost cost inflation was. We've seen over the last three years that the lost cost inflation picks have dropped about a point from about 7.25 to 6.25. I would look at, and what I'd say is also going on in the background at PHLY is we budget for about 4.8 points of CAT loss on average within our combined ratio. Last year was a very tough start to the first six months of the year.
We had the California wildfires, which was a significant loss for us, and then we had some severe convective storm in the St. Louis area, a lesser exposed area. The first six months had an elevated loss ratio. We ended up nicely coming in at 4.8 points at the end of the year. Because the jury's still out, there's no expectation that social inflation is slowing down. There's an element of conservatism in what we did not release last year, and therefore you see a bit of a convergence between our combined ratio and the peers.
In terms of the Lloyd's market, you can see from the graph on slide 14 that the Lloyd's market's performed very, very well, particularly over the last two years. The underlying rate environment has been strong. We actually underperformed in 2024. That was our particular old year reserve deterioration. If you strip that out, as you can see, we've really overperformed the market. Part of that is about the diversification of the portfolio. I think the other thing is just I always consider when I look at the Lloyd's market trends and I look at the current results, for the Lloyd's market, 2025 was a rather claggy year. So Summer '87, '88. The prior year before that was around '85, '86.
I think if you normalize the cat trends on that, it would probably be more into the 92s area because a normal Lloyd's cat ratio would be somewhere between 6% and 9%. We normally manage almost at 6%. Obviously that light cat activity, again, probably for us, the best performing portfolio has been the property portfolio. We saw seven years of rate increases, which is very unusual for the property market. The last two years, we've seen the rates come off. So that really reflects the performance. But for us really it was 2024 was the outlier in a bad way.
I'll add just a little bit to that. I do think that the hard market eventually lasts all boots. I do think our outperformance is going to come more during the soft market, and that is discipline to be able to walk away from business, that when the market does turn hard, we can really put our pedal to the metal and actually take more advantage of the hard market than everyone else. With respect to data, I would say the data on commercial insurance is very much proprietary to each individual underwriter. So, by having scale and having a good portfolio and having your data organized, we should be able to make insights on what we like better than our competitors, hopefully. But I think the data is one element of it.
Doing the analysis on the data and then having the discipline to follow the numbers and stick with it and walk away when you think the price isn't there. I think it's easier said than done. We talk about outperforming in a soft market. Our team is very much drive underwriting profitability, not top-line growth. So that's why you have to be disciplined on your expense ratio as well, because expense ratio is going to go up, and the premium goes down during the soft market, and you have to really tighten the bootstraps and wait it out a little bit.
But we wind up having to look at a lot more submissions, quote a lot more to be able to maintain the growth targets that we have. But we get tremendous insight, and I think we look forward to that. That's why we like bolt-on acquisitions. The more scale that we can get lines of business that we like and apply our underwriting expertise to them, we think we can do all those lines of business well. That is why we like to look at bolt-on acquisitions.
All right, great. We will move to another question on the floor if there is one. Michael.
I only have one, so that is probably me. It is probably my phone. It is lovely to see all you guys running businesses and then you guys who are more the structure. When I was speaking in the start of initiating, I asked with the IFRS accounts whether we would continue to see the business lines, and the answer was not 100%. It was like, "Yeah, maybe you will lose it." Does this mean that if I am here next year, you will be here next year? Or will you have been just woof.
I think.
Yes.
Yeah, well, the idea is that we would want to present our group companies to ensure that you have a good understanding of our entire business operations. But at the same time, the way that we report the grouping of our business segments, we receive a lot of inquiries, right? Some people want to do it in bigger brackets, some want it in smaller brackets. The way that we're presenting now is sort of like an answer that is sort of sitting in the median. Now, if you want additional insights from a figure perspective, then you should definitely feel free to contact our IR team, who will do their very best to answer any questions that you may have. But thank you for the question.
Great. Do we have any more questions on the floor? Gentleman over to the right.
Hi. Thanks very much. Just in terms of the solutions business, do you foresee as that expands, that's going to be entirely through additional M&A to bring in that expertise? Will that be kind of possible to organically grow that from within?
Thank you. It's going to be a combination of both. ID&E has its own aspirations to grow quite significantly over the next 5-10 years. They will probably want to entertain additional bolt-ons. We would be very supportive of those initiatives if that is what they see as a potential for growth. At the same time, ID&E specializes in disaster prevention for properties, right? We are definitely keen on expanding it through other lines of solutions, and I describe cybersecurity as one example. Now, I'm not necessarily saying we're going to go there, but that we will look into other avenues of solution provision, and if an M&A makes sense, we would definitely be keen to pursue it.
Great. Thank you. We are going to take another one from the Zoom. I will just read it. Over the last couple of years, you have expressed interest in acquiring U.S. specialty assets but have pointed to high valuations as prohibitive to U.S. M&A. Earlier this year, valuations have been lessening, but since May, they have fully recovered. Do you think you need to reassess your view of U.S. valuations, or has your focus really shifted to M&A outside the U.S.?
Another one your way, Brad.
Okay. I am happy to take the question. I think your assessment of the valuations in the U.S. is pretty accurate. I think there has been some of that coming back and being a little more reachable, but I think the valuations in the U.S. still remain quite high. How that is going to change over the next 12 to 18 months, we have a chart in here, somebody will have to tell me which page it is on, but that shows when we have tended to do acquisitions in the past and in a softening market or a soft market is when valuations tend to come into a place where they can be done.
You need valuations to work. You need that cultural fit that I talked about. You also need a willing seller. Willing buyers and willing sellers. Again, that softening market tends to bring people to the table. I think you are seeing that in the marketplace right now. There are a lot of companies that are up for sale. That is happening. Not to get on the AI topic, but there is also, or if you just want to talk about technology generally, there is a number of companies that are facing a large amount of spending connected to technology, AI being part of that.
That also is one that people have to ask themselves, are we better tackling that on our own or are we better to do that with a partner? We are a very attractive partner when people come to that conclusion. I can say with real confidence that there aren't deals that come to the table or the ones that you would have read about that we didn't have a chance to have a look at. We would have passed on them either because of valuation or because we just didn't think the fit was there.
We are very constructive on the U.S. market. I think we would be open to transactions in the U.S. I think I go back to that idea that in the U.S. it feels like bolt-ons are the more likely reachable kinds of targets right now. That could change, and we're opportunistic if that changes. That does focus us outside of the U.S. for a couple of reasons. One is that, just where valuations might be. But also we see geographic diversification to be a real focus for us.
Given the amount of U.S. business that we have, which we love, we see some real benefits to expanding geographically outside the U.S. with larger scale M&A. I think we publicly said Canada is an area that we look at, Australia, Southeast Asia, Africa. A number of areas that we're focused on, and I hope that comes close to answering your question.
Great. Thank you. Do we have more questions from the floor?
Thank you very much for the presentation. My question is related to M&A. I'm just wondering, when you look at outside of U.S., would you be open to exploring adjacent areas to P&C, like A&H and other sort of businesses as well? Maybe life is a step too far, but maybe you can comment on that. Or is the focus strictly on P&C when it comes to M&A?
You are becoming very popular, Brad.
Shocking. It is a fun topic. I would say if you are talking about larger scale M&A, I would expect that our next transaction would be a non-life P&C transaction. There are in areas like Southeast Asia, then healthcare could be something, A&H would be something that we would consider, but I think the focus and the more likely outcome would be a P&C transaction. Do you agree with that?
Yeah. Please, Kit.
If I may add, outside of U.S., as you know, in U.S., we have been focusing on specialty business. But outside of U.S., I think we will be more focused on standard business, mainly auto and also probably some portion of standard commercial and homeowners. Simply because specialty is a big market in U.S., but in the rest of the world, if you just focus on specialty, there is not much size. I think our focus on lines, even though overall it is going to be P&C, the lines we focus will be a bit different from U.S.
Great. Thank you. Any more questions from the floor? Michael.
I have one. You are re-risking assets. You are talking about doing deals in areas you have not been in. You are potentially increasing the exposures in your core operations. This is a lot of risk coming all at once. Is there going to be a moment where you kind of think, oops, that was not too clever, or is that why Berkshire is so important because they have got the solidity to kind of lift you through a period where you might have taken on too much risk?
Well, thank you for the question. Right now as we stand, we actually have the capacity to take on quite a bit more insurance risk, right? At this point in time, it would be a good problem to have if our organic growth outpaces our risk appetite. Let us put it that way. The addition of Berkshire’s potential balance sheet assistance would definitely help us. That would allow us the capability to address any additional risk-taking on a very volatile line of business. That would have to be completely aligned with our risk appetite and Berkshire’s. If that aligns, then yes, we might be able to look into additional risk-taking capabilities. At this point in time, from a risk appetite perspective, we have still got quite a bit of room for growth. Thank you.
All right. I am going to ask anyone on the Zoom call that would like to ask a question. All right. Let us see here. All right. Can we get a little more detail in terms of how potential acquisitions are valued? What are the hurdles? Are potential synergies ranging from expense to reinsurance purchases contemplated?
Go ahead, Brad.
So, valuation, I think you wouldn't be too surprised by the valuation approach. It really is looking at the expected profitability of our business over time. We try to be quite conservative in our expectations of what businesses can do, come up with a perpetuity model, and that will give us guidance on what we think a business is likely to be able to produce over a period of time. We have a pretty good track record on being reasonable about how we're putting a valuation together. But again, I think at the end of the day. Then, of course, after you've done a valuation, you have to see if you can get to a level that can entice a seller to sell. So again, it's a marketplace at the end of the day that you have to get to.
I think in many ways with M&A, the numbers, and maybe I'm a CFO by background, so the numbers, to me, are the easier part of the equation. It really is finding that fit, and where you have conviction around the business and how it's going to be able to enhance your business and how you build long-term value creation with that. I think the numbers you see in that third or fourth page that showed what these businesses have done since we acquired them. So finding those businesses that just become better when they become part of the group, that's what we're really good at doing.
That's really where that track record comes from. So there's the math that goes into the determination of what you would be willing to spend. I think in many ways it becomes not so much about the math, more about that fit. Is it a group of people that we would welcome into the family, and that we think when you come into the family, you're going to be that much better than you were before? That's really the thing that we try to focus on.
Thanks. Kit, you have anything to add? Oh, no? Okay.
All right. Great. Do we have any other questions? All right. Raymond.
Thank you. I just want to delve into the dynamics of your Berkshire partnership. How did it come to fruition? Did they approach you? Did you approach them? Will they call upon you if they have a deal as well? Is this a two-way relationship? Or is it very open and you're both looking at the same targets and you happen to cross paths? Thank you.
Well, thank you. I will take that one. They approached us. That is for sure. But it was a long conversation. The initial deal that they proposed was not really attractive to us, and so we said, "Thank you, but no thank you." Through the discussions, we agreed that adding on these three components would make it an attractive proposition on both sides. There is no doubt that Berkshire was most interested in the cash flow generated from the reinsurance.
We were okay with the reinsurance transactions because the financial terms and conditions of that specific deal was in line with what we sought from reinsurance providers. At the same time, it also provides us with additional validation through the equity investment and, again, the potential for future collaboration on the M&As. The interesting part of your question about is it a mutual discussion re: the M&As. Yes.
However, we consider that the onus is on us to toss up any potential M&A opportunities because I would go back to the earlier comment about us taking ownership of the PMA aspect of any co-invest purchases that we do. We will treat it as a 100% acquisition by us, meaning that, by all means, we do expect that we will be the majority investor in such deals. At the same time, we will take pretty much 100% responsibility for the successful PMI into our family. From that perspective, yes, never say never about Berkshire possibly tossing something up to us. But we expect that we will be the ones that say, "Look, this is what we plan to do. Would you be interested in coming on board?
Great. Thank you. Any other questions in the room?
Simon, can I just actually go back to an early question that you did? I forgot to mention one thing because
Yeah, please.
No, it's a real good one, right? From a risk management perspective, I said that we still got quite a bit of room for growth in respect of our risk appetite. At the same time, I do want to emphasize the underwriting discipline at the group company level. Even if we have room for growth, it doesn't necessarily mean we'll completely utilize it, right? There are certain risk categories like perhaps U.S. hurricane, where we say we're reasonably full in respect of our risk appetite.
However, it all ties in into the underwriting appetite and discipline of our group companies. In the past, we have been able to optimally manage the group aggregate risk appetite together with the underwriting discipline of the group companies. The collaboration and the communication that surrounds this, I think is fairly robust. I just wanted to point that out. Thank you.
All right. We have a question in the middle.
Thanks. Is shareholder return then the marginal beneficiary of what you're talking about? If the aim isn't to max out the investment necessarily just because Berkshire's there, I suppose, but if you're taking in outside capital for these deals incrementally, your cash flow should improve and you probably have more surplus to give back to investors. Should we assume that that will be a beneficiary?
Well, I will let my CFO answer that one.
Thank you for the question. Regarding the capital strategy and the impact of the Berkshire Hathaway partnership, I think there is no direct relationship at this moment. Our capital strategy is quite clear. The number one is a dividend, stable dividend. DPS growth in line with EPS growth. That is number one. Number two is investment into taking a risk and make a profit growth investment. That is number two. We do not have any intention to accumulate just the capital within the company. So if we not be able to find any good M&A in the future, at that time, number three, it is a share buyback by us. So that is quite clear our capital strategy.
In the case of a Berkshire Hathaway's collaboration, obviously, in the case of a M&A collaboration, for instance, if we find out any good opportunity in the future, we would, for instance, reduce or stop our capital buyback. That is our future strategy. In 2026, we do a JPY 400 billion buyback, we plan. In that process, we consider the potential impact of the Berkshire Hathaway partnership because obviously, after the Berkshire partnership, our capital flexibility will be expanded. Therefore, compared with the previous one, the JPY 400 billion payback is slightly larger than the previous year. So that is our current strategy of capital management.
Great. Thank you.
Just to add on, that's as Yoshi has explained. At the same time, we've expressed in our Aspiration 2035 that in 10 years' time, we would want to double our net income. At the same time, enhance our ROE to 17%. That strongly indicates that we would want to use the capital that we currently accumulate into investing into future value creation, be it M&A or additional risk-taking.
Now, I do appreciate that that's very far out and that investors would want more substance into exactly what our capital dividends would look like on a going-forward basis. We are in the process of formulating our next midterm plan, three-year midterm plan from 2027 to 2029, which we'll be announcing in May next year. So in that midterm plan, we will be presenting a more clear picture about the three-year dividend policy. Thank you.
Great. Thank you. Further questions from the room or from Zoom? Let me see if there's anyone on the Zoom that has one. Okay, this is another M&A one. A little different. If you look at your portfolio of businesses in the U.S., the main thing missing is traditional group benefits, which generates 20%+ ROEs and less volatile than P&C. Do you have any interest in this or broader A&H?
Don, you want to take that one?
We have group benefits in several companies. Susan's HCC has a very substantial level of medical stop loss business, which is an adjunct to the group benefits business. We at Reliance Standard and Delphi disability, and life business, which we find very attractive from the return on capital that's available to us. We would agree with that. On the other hand, these businesses have tended to trade at very high valuations because of that return on statutory capital. While we've looked at those opportunities, we've not found one that we think fits the criteria that Brad was talking about in terms of the combination of the cultural fit with our company, as well as an ability to deliver the financial returns, given the substantial prices that some of these traditional group benefit businesses trade on.
Great. Thank you. Anyone else in the room like to ask a question? I'll ask one. I'll ask this to Yamamoto-san and Mr. Irick. Tokio Marine has a successful history of being disciplined on its M&A and integrating all the various group companies into the Tokio Marine Group in a federated way. While being disciplined and focused on successful integration were integral to making this a Tokio Marine, a global insurance group, what do you see for the future of the international business over the next few years?
Well, Simon, that's a very broad question. I'm kind of thinking how to answer that. Probably, if you ask me, will we change our approach going forward in evolving or expanding our international business? I would like to stick to the basic of what we are doing, which is to stick to the basic principles of how we acquire or find the new members to join the international business of Tokio Marine, meaning, we will stick to the three basic principles of acquisition, meaning we will honor cultural fit of the management team, so that they can comfortably work together with us. Also, they feel comfortable working under the federated model, as Masa mentioned, in Tokio Marine.
Also, we would like to have each other companies or the business that would be added to Tokio Marine to have a very solid and unique business model, which has a strong capability of competing with their peers over the market cycle. As a result, they will be able to earn a high profit growth, again, over the market cycle. Well, that's my answer to finding a new partner or a new business going forward in the international business. Now, in terms of business field, again, I don't think we need to make much changes on that. For, say, United States, I think I would like to stick to specialty market because this has been the strength.
Also in U.S., I think going after a good specialty business will give us an opportunity to find someone with a unique and strong business model and high growth. Whereas, again, as I answered to the question earlier, on the non-U.S. market, we would like to see more expansion on the standard business. Obviously, risk-wise, we are concentrated. We seem to be concentrated or overweight in U.S.
I am not quite concerned about the risk concentration in U.S. because if you look at the U.S., even though geographically they are located in U.S., if you look at the risk, they are quite different. So we do see a rich risk diversification in U.S., so I am not much concerned about that. But ideally, I would like to see more geographical diversification of our global portfolio and would like to see in the areas outside of U.S., like emerging markets like Asia. So I hope that answers your question, Simon.
Yes. Thank you very much, Kit. So we have one more question from Zoom. Okay. Let's see. Maybe we will do not an M&A question. So this is for Matthew. Going back to the aspiration on increasing your lead and facilitation. Since there has been a rapid expansion in the number of vehicles, what is your process in choosing partners and allocating capacity? How much could this market grow, both for you and the industry?
Well, in terms of the facilities that we are particularly keen on, we see all of the facilities in the market. I think that is partly because of our relationship with the major brokers. All of the major brokers have these facilities now. So we do get the chance to look at all of them. I think for us, one of the keys is the level of data, and it does vary an awful lot by broker. Some of them have got very strong data. Some of them are just putting the services together and do not have much data at all. So for us, the underlying portfolio profitability would be key, and the amount of data for us to properly analyze the portfolio itself, and then how it fits in with the balance of our TMK portfolio.
But we're fortunate that we do get to see all of them, so it is a rich stream of data for us. So even when we don't buy them, it's useful for us to analyze the data, see how the portfolio's performing, and where we want to focus on. For us, it has been a growth area, but when I look at some of the major peers in the market, they have got significantly larger port values than we have.
We don't see this as being a very significant part of our book, but it could be. It's a useful way of us tracking data, tracking our performance across the broker community, and we think they're here to stay. I think the other thing that's changed about broker services, in the past, the brokerage services have really been driven by the local brokers seeking business.
What we're seeing is a change in the underlying dynamics of these broker facilities, where they are using the technology to actually feed the business into the new facilities rather than using brokers. So they're effectively taking the risk selection away from the broker community and automating it. The advantage of that is it becomes a whole portfolio play. And if you've got access to that data, and it's granular data, you get a very clear picture of how you think that whole value is moving.
Great. Thank you, Matthew. And a follow-up from Matthew.
When we think about your ROE longer term, you've obviously said 17% is what you have in mind versus 13% today, and that brings you perhaps a little bit more in line with some of the European peers. To get there, is that more of a mix effect? Is that more of a operating leverage, or is it sort of coming back to a little bit what we were discussing earlier, just taking on a little bit more risk? And I guess we can look at it twofold, not just how you expect to get there, but perhaps why you think what the key reasons are for being a little bit behind some of the other peers today.
Okay, I'll let my CFO initially answer that one.
Thank you for the question. First of all, I think the Aspiration 2035, the most important KPI for us is not the ROE, but the exact number of our modified net profit numbers, JPY 1.7 trillion. That should be a starting point because we'd like to expand, we'd like to grow. In that sense, I think the JPY 1.7 trillion is our most important KPI. And once we achieve that JPY 1.7 trillion, as a result, ROE should be 17%.
But this Aspiration 2035, this is not a concrete business plan. It's like a postal guide for us. It's not accumulation of the individual activities. It's probably combination of organic growth, as we explained in this session, and it's combination of the M&A, bolt-on type M&A, or shareholder return. Those various options should be combined to achieve 70% ROE in the final place.
Actually, this is a very simple calculation. JPY 1.7 trillion profit, it's our numerator. Our denominator is JPY 10 trillion. That means in terms of the profit, we'd like to double the profit numbers. But at the same time, we'd like to, using risk diversification, net asset itself is just 1.4 times compared with the current situation. In order to going up to the ROE 17%, double the profit, but 1.4 risk-taking. That is the current strategy.
Thank you, Yoshi. Just to add on to that. It is 10 years out, right? A lot of things can happen in between. And it is our aspirational sort of guidepost. That being said, as Yoshi mentioned, it's going to be two components plus one. First one is going to be the organic growth, including the profitability enhancements, right? And the second is the M&A. But it's important to note that the fund for the M&A, a lot of it will come from the divestiture of our cross shareholdings in Japan. And we've already committed to doing that by end of fiscal year 2029, meaning March of 2030, which is no doubt right now an ROE drag. So by divesting it and reinvesting in further value creation, this will be definitely a booster to our ROE.
I would not want to underestimate the effect of the solutions business, where this would allow us to enhance our returns with very little additional capital requirement. We are saying that we would want to increase the profit from JPY 10 billion to JPY 100 billion, which is tenfold improvement. That should also give a nice boost to our ROE. So that is three components that will provide the ROE enhancements that we target. Thank you.
Great. We have reached time, but we can fit in one more question if anyone has one from the floor. If not, then we have come to the end of the Investor Day. Thank you for your participation today and your candid feedback to senior management. Before concluding the meeting, I would like to once again hand it over to our CEO, Mr. Koike, for his closing remarks.
Well, thank you, Simon. Again, thank you everybody for sparing your time and spending time with us today. It really means a lot to us. We really appreciate the support and trust given from our investor to our business platform. I have talked about Tokio Marine remaining a very purpose-driven company, but at the foundation of that is our multi-stakeholder approach, where we are very keen on making sure that we keep our employees energized and happy to work for Tokio Marine. In return, provide satisfactory services to our customers and our business partners. Through that, earn good money to be able to return to our shareholders. We are very keen on making sure that we continue to provide enough value for our shareholders to continue your trust and support.
We remain very committed, we meaning our senior management right here, remain very committed to enhancing our business platform to continue building and creating value for you. Again, really appreciate you spending your time with us, and thank you very much, and definitely look forward to continuing the relationship. Thank you very much.
Great. Thank you, Mr. Koike. On behalf of Tokio Marine Holdings, thank you all again for your time today. If you have any further questions, feel free to follow up with the global IR team. If you wish to speak with any of the Tokio Marine Group management, since they are here for a few minutes, feel free to introduce yourself, and thank you again for coming to our London Investor Day.