As it is time, we would like to start the session. Thank you very much for joining us for Tokio Marine Holdings Fiscal Year 2022 Interim Investor Relations Conference, in spite of your busy schedules. I will be serving as the moderator today. I am Ishiguro of Investor Relations Group. Let me start with today's format. As a precautionary measure against the spread of COVID-19, we are holding the event in a hybrid format, combining online and offline.
The venue is run with minimal staff members and preventive measures are thoroughly in place. The speakers will not wear a mask while speaking, for the ease of hearing. Information is being provided in Japanese for the Japanese audience joining us online. Let me introduce the speakers today. From Tokio Marine Holdings, Group Chief Executive Officer Satoru Komiya. Co-Head of International Business, Akira Harashima. Group Chief Financial Officer, Kenji Okada. Group Chief Strategy Officer, Yoichi Moriwaki. Group Chief Information Officer, Yoshinori Endo.
Group Chief Digital Officer, Masashi Namatame. Group Chief Risk Officer, Kiyoshi Ajioka. Group Chief Diversity and Inclusion Officer, Mika Nabeshima. From Tokio Marine & Nichido Fire, President and Chief Executive Officer, Shinichi Hirose. Managing Director, Kiyoshi Wada. Managing Executive Officer, Eiichi Hosojima. From Tokio Marine & Nichido Life, President and Chief Executive Officer, Tetsufumi Kawamoto. As for today, we will start with a presentation by Group Chief Executive Officer, Mr. Komiya, using the material available on our homepage. After which, we would like to take your questions. We are scheduled to conclude at 5:00 P.M., but we may run over by 30 minutes maximum, depending on the situation. Komiya-san, over to you.
Hello, everyone. My name is Komiya, and today I am pleased to welcome you to our Investor Relations meeting for the second half of the year. Thank you also for extending and continuous support to Tokio Marine Group, as always. Today, I would like to dive deeper into our businesses. In other words, I would like to explain in details our understanding of the business environment and our strategies and actions based on this understanding. We are confident that we can maintain our top-class EPS growth even in the current volatile environment, and that we can raise our ROE to a level comparable to our global peers. We hope my explanation will deepen your confidence as well. Without further ado, let's get started. Please turn to page three. I will be speaking over these three parts that you see in front of you for about 45 minutes.
Here is an overview of the three messages we wanted to convey to you today. The first point is the EPS growth, its angle, and the confidence. As announced last week, normalized basis financial earnings for fiscal 2022 is showing strong fundamentals, such as year-on-year 9% growth in profit. By appropriately responding to volatile business conditions such as inflation, natural disasters, and COVID-19, we will continue to achieve world-class EPS growth. Backed up by this further confidence, we would like to lift ROE to a level equivalent to global peers while controlling volatility. This is a presentation of my determination to do so. The second point is the angle and confidence of DPS growth with disciplined capital policy.
In line with the basic principle of shareholder return consistent with profit growth, DPS growth for fiscal 2022 will maintain the 18% growth as planned at the beginning of the year against the backdrop of a strong underlying profit trend. Beyond that, we would like to continue DPS growth by means of both angle and high degree of confidence. Adjustment to capital stock stance also remains unchanged. We are aware that our current capital level is sufficient. Therefore, in order to execute the JPY 100 billion of share repurchase as we announced at the beginning of the year, the board of directors decided last week to spend the remaining JPY 50 billion to complete the program for this fiscal year 2022. The third and final point is to realize high-quality management, which serves as the foundation for growing EPS and DPS with degree and confidence.
Because our business expands across the globe, global risk diversification is the cornerstone of our strategy. Over the period of 20 years, we have increased our profit while mitigating expansion of risks. An important means of accelerating risk diversification is the in and out strategy of businesses. In particular, when conducting M&A, we believe that it is essential to carefully determine the intrinsic value of the target. It contributes to risk diversification and generates synergies. We need to be selective on deals that can realize high ROI and successfully execute on those deals. Lastly, regarding business-related equities. In May, I told you that we were stepping up our efforts to accelerate equity reductions, and that I would be able to inform you of our future policy as early as November or as late as next May.
While there is no change to these efforts, it's not easy, and it's never ending, but we are steadily seeing results. In 2022, on a four-year basis, we expect to achieve JPY 110 billion of equity divestment. By 2023, we expect to accelerate the pace of diversification to JPY 120 billion-JPY 130 billion. In the next midterm plan, we are considering to accelerate the pace of reduction to about 1.5x the current level. Through the disciplined capital policy described above, we intend to achieve world's top-class EPS growth and ROE, and corporate value improvement. I will now explain the above topics in more details. First, I will explain about the EPS growth with confidence. Please turn to pages four and five. On page four, we are showing a revised forecast for 2022.
As I explained last week, for this year's adjusted net income, we have revised down JPY 150 billion from the initial plan to JPY 400 billion of adjusted net income for 2022. This was a major downward revision. By looking at the factors behind it that's shown on the left end of the waterfall, it shows the transient effects such as COVID and natural catastrophes creating negative JPY 160 billion against the profit, and that was the major cause. On page five, we are showing the normalized basis profit excluding the transient items. This is the underlying capability and an indicator that we emphasize as management in order to see the underlying tone of the business. On a normalized basis, we are forecasting JPY 560 billion, year-on-year 9% growth.
The biggest driver of growth is the much higher than planned organic growth of our international business, which is a reflection of the fact that our capabilities are steadily improving. As for the effect of JPY depreciation, as indicated, its impact will be limited in fiscal 2022. But in forecasting 2023, it will be a major factor to push up profit in fiscal 2023. Simple math would tell me that the launch pad for starting 2023 would get elevated to JPY 600 billion coming from FX. Next, I will explain about the current business environment and sustainable EPS growth. Please refer to pages six and seven. On the left side of pages six and seven, we are showing the issues we are currently facing and their impact on fiscal 2022 results. This was a question many stock investors asked.
As you can see, the current business environment is not an easy one. Inflation, natural catastrophes, COVID, war, market turmoil, et cetera. Volatile environment will continue to appear in different forms going forward. In this context, Tokio Marine will also be affected by a certain extent, and we are not intact from any problems that may arise. However, as I explained earlier, the underlying tone of the business is strong, and the recent performance is solid. On top of that, we will steadily implement the strategies shown on the right side of the slide and further continuously expand both underwriting and investment income. That is how we see it. I would like to explain the basis for the statement and the strength of our business. Please turn to page eight. The first is the ability to achieve rate increases in international business.
On the left side of the slide are the actual rate increase results for Tokio Marine HCC and PHLY. As you can see, the important thing in rate hike is to determine the current as well as future loss costs, and to achieve rate increases that fully meet those elevated costs. We have been able to continue to increase rate above our loss cost in the past, and even in the current sharply inflationary environment. What makes this possible is the strength as we show on the right of the slide. For example, at Tokio Marine HCC, it has a well-established position as a global leader in the specialty sector. It has strong customer trust and brand recognition. As a result of these factors, Tokio Marine HCC has high price negotiation power, which makes it possible to realize high rate increases and earn high margins.
In PHLY, they work with preferred agents who are agents with similar philosophy as PHLY and execute disciplined underwriting. PHLY has a very strong agency network. PHLY provides preferred agents with superior products and services. By doing so, they have gained a high level of support from customers, and as a result, they have been able to increase rates above loss cost as well as above market average. They are constantly focusing on managing their entire portfolio, not just their existing lines of business, thereby achieving enhanced profitability. Please turn to page nine. On the left of the slide is the list of strategic actions taken by Tokio Marine HCC. In Tokio Marine HCC International segment, which is currently doing well due in part to market hardening, Tokio Marine HCC is aggressively pursuing bolt-on M&As and new risk-taking.
For example, in fiscal 2020, Tokio Marine HCC did a bolt-on M&A of GCube, a global leader in renewable energy insurance. By onboarding marine cargo underwriting team, they are expanding new underwriting businesses. As shown in the orange portion of the bar graph on the upper left, I believe you can see the effects of the new initiatives HCC has embarked on. On the right side of the slide, we are explaining PHLY's tiering strategy, in which PHLY categorizes its products and customer segments into Tier 1 through Tier 3 based on profitability of business. PHLY then builds an underwriting strategy for each tier and executes them with discipline. As a result, profitability of the overall portfolio has improved, maintained, and enhanced. Each of our GCs is thus constantly evolving in a mobile and agile manner. Please turn to page 10.
Currently, North America is experiencing two types of economic inflation: COGS inflation and medical/wages inflation. In addition, as the economy recovers from COVID-19, social inflation may also accelerate once again. In this context, the impact of inflation onto our performance, as stated in the headline, we believe that our resistance to economic and social inflation is strong, though we can never relax. More specifically, looking at the degree of impact on our company by types of inflation, the largest impact is on healthcare and wages at about 45%, followed by social inflation, and finally, goods and services in that order. In this context, inflation related to goods and services at the bottom of the slide mostly impacts lines of business such as property and auto. But as you know, our North American portfolio centers around specialty.
Our exposure is about 15%, which is relatively, structurally unaffected when compared to our peers. Our approach to this is, as I explained earlier, forward-looking rate increases by leveraging our strength and disciplined risk selection. Now, I will explain about the orange portion of the bar, which is social inflation that accounts for approximately 30% of our exposure. Please turn to page 11. The upper part of the slide shows what PHLY has been doing to avoid social inflation since four years ago and what they have learned from those four years. They have gained the ability to avoid inflationary impact by reducing high limit policies and promoting early settlement. PHLY has also gained the ability to mitigate the impact by building robust portfolio through these efforts. They have become much resistant to social inflation.
On the bottom of the slide, we are showing reserving situation as an ability to prepare for impact. As you may recall, we were one of the first to significantly increase reserves in fiscal 2019, and conversely from 2020 and after, we are reversing those reserves. As shown, our reserve level is strong and appropriate. Now, I would like to continue to explain about our resistance to healthcare and wage inflation. Please go to page 12. In our portfolio, the main lines affected by medical cost and wage inflation are medical stop-loss and excess workers' compensation. Medical stop-loss is short tail and has limited impact on prior year loss reserves. Excess workers' comp, on the other hand, is long tail, but the amount of coverage or compensation is generally calculated based on the wage level before the accident, i.e., before inflation began.
The impact is limited here as well. Furthermore, we have executed proactive rate increases and SIR increases in order to control expectant rise in current and future loss costs. Therefore, it will be fair to say that we also have strong resistance to medical costs and wage inflation. We report on the specific efforts of each company at the global committees and also our Chief Executive Officer meetings, which are then shared across other global companies.
Next, I would like to explain about the contribution from international MNAs. Please turn to page 14 and page 15. Page 14 shows the status of recent MNA activities in developed markets. We acquired Pure in 2020 to capitalize on the strong growth of the North American high net worth market. As you can see on the left side of the slide, we are making good progress in capturing both top line and bottom line results.
On the right side of the slide is the status of Standard Security Life, which was acquired by Delphi last year as a bolt-on acquisition. It is called Standard Security Life. Standard Security Life is involved in paid leave insurance and has already performed in excess of its plan. We believe that we can achieve further growth as more states are expected to adopt the scheme. We believe more growth to come from this entity. On page 15, we are showing some more examples from the emerging markets. As we show on the left of the slide, in Thailand, Safety has completed its integration with our existing local subsidiary. It is growing faster than planned, and we believe that by leveraging Safety's strong retail sales network and claims service system, we will be able to further enhance our presence in the promising Thai market in the coming years.
As shown on the right of the slide, joint venture with Caixa is also doing well. CaixaBank is a dominant player who had 70% of the mortgage market, and Fifala in Brazil is doing well in capturing this growth momentum in Brazil. Next, we would like to look at the domestic non-life insurance market. Please turn to page 16. With regard to domestic P&C insurance business, although natural catastrophes must be managed, I believe that this business is basically highly predictable and is a business where we can sustain growth in underwriting profit. The biggest profit driver in this business, most recently, is the improvement of domestic fire insurance profitability. Fire insurance has been in a constant loss-making state, but we are now taking truly comprehensive measures, including rate increases and product reviews over the past four years, as well as doing disciplined underwriting and reinsurance cycle management.
As a result, as shown in the center of the slide, underwriting profit on normalized basis for 2022 turned profitable at JPY 8.5 billion. We expect a profit of JPY 37 billion in fiscal 2023, which means that we can finally expect to achieve combined ratio of less than 100% with high certainty. Since I took office, I have been saying that partial optimization is not good, but ballpark figure in managing business is not good for Japan, which is a natural disaster-prone country, and fire insurance being so important, I want to make fire insurance a sustainable line of business. To this end, I have said that we want to achieve positive underwriting profit with fire insurance alone and during the current midterm management plan and achieve ROR in line with the cost of capital by 2026-2027.
Thankfully, we are slightly ahead of the schedule and could be achieving the ROR target during 2026. Next, I will talk about the ways to improve business efficiency. Please turn to page 18 and page 19. During the course of the current midterm plan, we have invested a cumulative total amount of JPY 40 billion in digitalization, and by thoroughly yielding from this investment, we aim to reduce internal administration work by 20%-30% by the end of 2026. By the end of 2023, which is the interim point, we will achieve 15% reduction, as I have already said. The progress is shown on the lower left of the slide. In the initial year of when this effort began, despite the fact that it took time to kick off the project and to change people's mindset, we are so far in line with this plan.
The right side of the slide shows when and how these efforts will affect the combined ratio and expense ratio at the bottom right, as well as their impact to non-insurance business income shown at the center right of the slide under number three. First, as of 2023, the resources created by administration work reduction will be allocated to top-line expansion of special insurance, which will contribute JPY 10 billion to profit. In addition, we will also use the resources to improve profitability of fire insurance and expand the disaster prevention loss mitigation businesses.
As a result, we expect the combined ratio to be around 92% as written on the very bottom. Furthermore, as of 2026, in addition to real reduction of JPY 10 billion in administrative expenses, we will further promote top-line expansion and loss ratio improvement to lower the expense ratio to 31% mark, and maintain stable low combined ratio.
In addition to these, under number three, the new profit opportunities are being created. For example, as shown on page 19, by forming an alliance with Kokumin Kyosai Co-op, we are aiming to start the fee business, which is expected to contribute JPY 6 billion to group profit annually. This is one direction that we are taking to expand the resources of earnings in the future. In terms of investment in systems, if you go to the appendix on page 47, it describes our efforts to reestablish our IT infrastructure or the so-called open infrastructure initiatives. Please allow me to explain a little about this initiative. Please turn to page 47. The issue of legacy mission-critical system has often been discussed in the media, and it's also referred to as the 2025 Digital Cliff.
The current system has, been for a long time, created recurring cost and is a rigid mainframe system, and that's what we still have. This is not something we should continue to have. We should use more AI and cloud systems, and it should be a system that can align with the external systems, and it should be more flexible. By having such an IT system, we should be able to avoid such a large fixed cost and at the same time create additional value as IT while we are trying to drastically change the system. This is not just a digitization on the facade, but it will be a new IT strategy to provide new value.
We have done the Business Renovation Project over 10 years ago, and this is how we look at the IT systems as of today, and this is what we are challenging towards. That is what I wanted to tell you. Next, I will explain about the expansion of specialty insurance. Please go back to page 20. The group plans to achieve over JPY 100 billion in revenue from specialty insurance during the current midterm plan. The pace is steadily accelerating and on track as we speak. Penetration rate of specialty insurance is still low in Japan, which gives room for growth in the market. It is about how we can create a market that responds to customer needs today and in the future. As a company with a track record in solving social issues, this is a great field for us to work on.
With this in mind, four areas were selected as priority areas with strong social impact where we can contribute. These areas are healthcare, SME, GX, renewable energy, and cyber. We are picking up speed in our efforts. We are committed to serve our customers and communities, and as a result, we are determined to build a specialty market and capture the ever-growing potential. This is how I see it. To close the sustainable EPS growth part, let me cover investment. Please turn to page 21. On the far left, investment income is calculated by multiplying AUM at the center and income return on the right. By steadily raising both, we intend to steadily grow investment income. In the center of the slide is a graph showing how AUM has grown over time after we acquired Delphi.
AUM has grown on the back of growing business across the group and assets managed by Delphi. On the right, the income return graph shows Delphi's strong track record of consistently outperforming index. At the bottom of the slide are examples of investment actions taken by Delphi in the first half of 2022. As the U.S. entered the monetary tightening phase, the company selectively increased floating rate assets, CRE loans in particular, building the portfolio flexibly following changes in the investment environment. As a result, in fiscal year 2022, Delphi, on a stand-alone basis, is expected to post over JPY 130 billion in profit. Now, why is Delphi strong in investment? Why, despite the volatile market environment, is it able to keep it up?
Let me elaborate more on page 22 and page 23. On the left, on page 22, is strength and uniqueness of Delphi's investment team, which can be explained in twofold. First, source of investment, is long-term, predictable insurance liability cash flows. Therefore, unlike asset management companies that invest money in another person's account, we are able to hold to maturity and can tolerate both liquidity risk and short-term market fluctuations. Second is having an investment team with highly reproducible returns. The team with the broad network and information gathering and analytical capabilities has experienced numerous tough market cycles, including the global financial crisis and COVID, and produced stable returns throughout. Such a team cannot be easily emulated nor replicated.
Right side of the slide describes how Tokio Marine's ERM framework of watching ROR closely is embedded in Delphi from its management to frontline asset managers, which, as a result, have kept high information ratio. Page 23 describes the impact of rising interest rates and widening credit spreads on our credit investment. In short, both have a positive impact. Regarding rising interest rates, as shown top right, half of the current portfolio consists of variable rate assets. Rise in interest rate will have a positive impact by direct increase in income return and/or improved yield of the portfolio through reinvestment. Bottom right of the slide describes our view of widening credit spread.
Naturally, should I say, the company does not have legacy assets with significant unrealized losses, and if the value of investment goes below its intrinsic value, that will be regarded as a great opportunity to revisit the investment portfolio. So far, I have taken you through the feasibility of sustainable EPS growth of the company. Now, let me turn to management's idea on our way forward on the back of further confidence described above. Please open up page 24 and page 25. Tokio Marine has set a medium-term target of over JPY 500 billion in adjusted net income and adjusted ROE of around 12%, which we already achieved in fiscal year 2021 on both actual and normalized basis. In fiscal year 2022, I believe our normalized based underlying performance has further elevated.
Since about two years ago, regarding our next steps beyond the JPY 500 billion and 12% mark, I have said I am open-minded. Let me give you some color on what the company has been contemplating. Starting with profit on page 24. I believe what matters most to you in the capital market is the delta. When we think of our profit level reached as a result of being of service around the world as a global insurer, it requires courage to say, but I think it boils down to continuing to achieve world's top-class EPS growth. EPS growth for the past decade has been +18% high amongst our global peers. Our recent organic growth alone is a +9%. With rise in social issues expected in the future, we want to support our customers and communities in times of need, which is our purpose.
There must be more we can do to meet expectations and be of service. In due course, we intend to continue to achieve world's top-class growth. Next is ROE. Please go to page 25. While I have shown a sense of direction of raising the adjusted ROE after achieving 12%, the company has not referred to any specific target. My view is to raise adjusted ROE to a level that is on par with global peers, which could be around 13%-17% as we speak. Bringing to a level that is comparable with global peers. There were discussions on whether to set a specific target, such as 15%, for example, but with anticipation for rise in ROE amongst our peers, we decided to set a moving target of matching or coming on a par with global peers to bring ourselves to the next level.
This is the management's thinking and our vision, ideal situation for the future. Therefore, the medium-term plan, which we will present to you in the future, will be tuned towards world's top class EPS growth and ROE on par with global peers. Let me turn to the second chapter, DPS growth with disciplined capital policy. Please refer to page 26. Our shareholder return is based on dividend payout and to grow DPS sustainably in line with profit growth. Therefore, DPS growth, backed by high EPS growth with confidence, will remain unchanged. Fiscal year 2022 was a year with market events, such as COVID and natural catastrophes, yet was offset to a certain extent by sustainably feasible profit growth. On a normalized basis, profit remains strong and five-year average adjusted net income source of funding for dividend is growing.
In that context, fiscal year 2022 DPS will be JPY 100 on a stock split basis as originally planned. DPS growth of 18% remain unchanged from original plan. In FY 2023, we will increase payout ratio from our original guidance to 50%. Profit available for dividend is expected to grow. Profit in fiscal year 2018, a major non-CAT year of JPY 280.9 billion, will be out of the calculation, while fiscal year 2023 profit of JPY 600 billion above will be included. I expect dividend resource to grow firmly in the course of time. Please go to page 27. Capital level adjustment. As shown on page 27, ESR as of end of September was 122% in the middle of the target range. The company has no intention to accumulate capital needlessly. As always, we will continue to invest in business that contribute to improve ROE and/or execute buyback.
If there is an opportunity for M&A that add to our corporate value, we will execute such a transaction. If not, it is a matter of course to execute share buyback since we have ample investment capacity. In this context, as announced on Friday, share buyback of the remaining JPY 50 billion of the total of JPY 100 billion for fiscal year 2022 has been approved by the board. Lastly, on high quality management, please turn to page 28 and page 29 together. Maintain DPS growth underpinned by and consistent with EPS growth. In order to enhance our confidence, it is indispensable to assess the business environment in a forward-looking manner and take the right action early and plan ahead. In this regard, let me highlight three things we believe are especially relevant for us as a global insurer.
The impact of COVID-19 in Taiwan, which I briefly talked about last week during the conference call, has raised concerns in the market. As we do business globally, it is possible we face a major incident from time to time. While COVID in Taiwan was a market-wide issue in Taiwan, I am disconcerted by the fact that loss estimate has grown this much. We will make the most of the lessons learned from this experience and raise the level of management of our group as a whole. In the meantime, as shown on page 29, risk diversification effect the company has been working on over the years was seen as intended regarding Hurricane Ian. The hurricane, which occurred end of September, caused immense damage across Florida and South Carolina.
It was a scale second to Hurricane Katrina in 2005 among global natural catastrophes, with total estimated industry loss reaching $56.5 billion, of which our loss of JPY 33 billion is 0.4% in share of net incurred losses, while the market share of our North American business is 1.3%. This speaks for itself of how the diversification of the business around specialty lines has led to intended results. Please open up page 30 and page 31. Since Tokio Marine, we are now doing business globally. Any event in any corner of the world, be it COVID in Taiwan or a hurricane in North America, it is no longer someone else's problem. To put it the other way around, it is crucial to manage and run the business assuming that something will happen. That is why the cornerstone of our strategy is global risk diversification.
We pride ourselves in the track record of achieving profit growth while controlling and optimizing the risks for 20 years. In fact, in fiscal year 2022, major transient factors such as inflation, natural catastrophes, COVID and war were, to a certain extent, offset by strong organic growth in the international business to suppress the impact of transient factors on profit to within 30%. I, however, am not satisfied at all with this 30% figure.
We need to further promote global risk diversification and risk reduction, and there is still more room for that. This is my thinking. Please go to page 32. M&A for us is a means to an end to achieve risk diversification and profit growth, and it is not the purpose. Therefore, we will select transactions that truly contribute to corporate value enhancement and execute with discipline. We will not rush. Regarding large M&As, valuation is still too high.
We need to be patient under the current circumstances. We will focus on market intelligent activities and continue to patiently wait for opportunities. On the other hand, other in-out strategy is on track. We have newly established a footprint in Canada, and on the divestment side, runoff of Tokio Marine Kiln reinsurance business. There are no exceptions. Even in the funding business, we will execute steadily with discipline. As announced today at 10:00 A.M. Japan time, we have decided to increase shareholdings in PT Asuransi Tokio Marine Indonesia, our Indonesian P&C company, from 60%- 80%, reaching the upper limit on foreign investment. It will not only allow us to embrace the growth potential of the Indonesian market, but also promote further geographic diversification of the business portfolio. We have not yet announced any bolt-on M&As in fiscal year 2022, but there are a number of bolt-ons in the pipeline.
We will not rush, as in the case of large M&As, but we will continue to make effort to execute transactions that enhance our corporate value. Lastly, let me update you on our effort to accelerate reduction of business-related equities on page 33. While there is no end to accelerated reduction of business-related equities, it is not simple, but we are making steady progress, as I mentioned at the beginning. Let me elaborate. First of all, in fiscal year 2023, we will step up our divestment to JPY 120 billion-JPY 130 billion, and furthermore, during the next midterm plan, we are thinking of accelerating to 1.5x that of current level. Of course, progress of future dialogues, negotiation, and share price, among others, need to be taken into account. Specific target will be presented at the time of midterm plan announcement.
In any case, capital and funds freed up as a result of divestment of business-related equities will be used to address social challenges and to invest in more capital-efficient business as well as shareholder return, eventually leading to world's top-class EPS growth and improved ROE expansion of equity spread. That is all for me. Once again, the company is expected to pay larger insurance claims than an average year due to domestic natural catastrophes, among other reasons. Corporate value is a sum of economic value and social value. Compared to an average year, the weight of the latter was slightly higher this year. There is a moment of truth for any company when the value of the company for society is determined. The moment of truth for the group is nothing but being there with customers and community in times of need. Now is such a moment.
The efforts of the people in the front line around the world who are facilitating the payment of insurance claims must be seen as a springboard for growth. This will drive future economic value. By sharing what we've learned in the moment of truth across the group and making the most of it the next time, we will strive to garner trust and support from the market to become even stronger and to ensure what we do today leads to profit tomorrow. We will continue to realize high-quality management, world's top-class EPS growth, and high DPS growth on the back of it, as well as high shareholder return. Please let us get better at what we do. Your continued support is greatly appreciated. Thank you for your attention.
Thank you, Mr. Komiya. Now we would like to welcome questions. Please limit your questions to just two questions per person. From the floor, if you raise your hand, I will be pointing to you. Please wait until you receive a microphone before speaking. Please keep your mask on as you speak. For those participating via telephone or online, if you have a question. The MC is explaining how to ask a question to the Japanese participants. For the English participants, please write in your question to the chat box at the bottom of the page. Please send in the messages through your chat box. Due to the time constraint, we may not be able to answer all of your questions, in which case, our group will get back to you at a later date. I'd like to open the floor for questions.
From SMBC Nikko, Mr. Muraki. Please wait until the microphone comes to you.
My name is Muraki from SMBC Nikko. I have two questions. First, on page 25, ROE. You said that you want to raise the ROE relevant to the level of the global peers. You said that very clearly, but up until now, you have had some gap in between yourself versus the global peers. For example, Allianz, the nine-month tangible ROE is in excess of 15%. That means that when you fight against Germans, you still cannot win. When, how long would you take in order to improve this? What I say may be critical, but we are starting to do some KPIs for the next midterm plan. JPY 150 billion of equity sell down and 31% for the expense ratio.
If you keep these levels of numbers, it will be difficult for you to be filling the gap. If you think that the ROE improvement is important, but then when you look at each KPI, the two sides are not compatible. How would you still view this gap? My second question is about the international business. If you go to page 56, in the past, the market evaluated your international business highly. However, in the past few years, 2019 and 2020, the combined ratio worsened. In Australia, and then there's Taiwan, some of these unexpected risks are suddenly surfacing. What would you learn from this? In order for your international business not to be reduced, what would you do?
Thank you for your questions. The first question was about ROE. Listening to our initiatives, perhaps more speed is required. On this point, from Chief Financial Officer, I would like to ask Okada-san to answer your question. Regarding the international business, regarding Australia, Taiwan, et cetera, what have we learned from that, and what will we be doing in the future? The Head of International Business, Mr. Harashima, will be answering the second part of your question. First is from Okada-san.
This is Okada speaking. Thank you for your question. As Muraki-san pointed out, indeed, for the business-related equities, we have announced the KPI regarding that to be part of the next midterm plan. The next midterm plan drafting process will start from this point onwards, and we'll have a discussion internally. As Komiya-san mentioned, within the group, the organic growth as well as bolt-on opportunities, better growth, better profit growth, et cetera, will be part of the plan.
Also at TMNF, as we have explained, the fee business which is highly capital efficient will be starting. By using entities such as Pure Group that has already joined the group, we would like to repeat those efforts so that for ROE, on normalized basis, it's about 13%, it's 13% mark. We want to enhance that further in the next midterm plan. For the announcement, we would be making the announcement in May of 2024. Nominator and denominator, when you compare the two, we don't want to be doing the shrinking equilibrium. As I said, in the domestic business and also in the international business, a profit growth momentum or profit growth should get stronger. For the denominator portion, business-related equities, we are having discussions with the share issuers, and I have just updated you with where we are in terms of the divestment.
Something that's difficult to write here with numbers is the in and out strategy and also portfolio management, because businesses are being replaced. I have shown you some examples of that, and we are accelerating that effort of in and out. Centering around nominator as well as denominator, we want to be achieving those numbers. We want to be executing towards those numbers so that we meet our goal. Thank you.
Now, from Harashima-san, we'll answer the second part.
Muraki-san, thank you very much for your question. As you said, on page 56 and page 55, it talks about the international business. First, if you go to page 55, on normalized basis, the momentum is high for the international business. If you go to 56, as you can see, the biggest issue with the midterm plan is the expansion of the underwriting profit. That's what we were working on the most, underwriting profit. That's on page 56. As Komiya explained, in the international business, the business momentum is strong.
On the other hand, as Muraki-san mentioned, we have the issue in Australia, another one in Taiwan. While the momentum is strong, there are some offsetting surprises that we don't want to see. How do we get rid of those surprises is an important issue that's attached to the international business. With that regard, one is that risk management, there has to be a thorough revisiting of risk management so that we will be able to mitigate risks beforehand. On top of that, in a broader sense, governance is something that has to be reviewed once again.
What Tokio Marine is thinking goal in this area is that regarding governance, there were various group companies that joined the group, but we had a governance methodology across the board to be applicable to all GCs. Now we think that we need to be mindful of the level of maturity. Especially for mid and small-sized entities, compared to the larger entities, they have some weakness. Depending on the maturity level of each GC, we need to be taking different ways of exercising governance. For the mid and small-sized entities, more so than before, we need to be more hands-on so that we can strengthen their governance. While we do that, human resources, talent. Management doing business management and strengthening the talent over the management work is important, and also risk culture. In terms of culture, we need to be strengthening the risk culture.
As I repeat, the fact that we had these surprises surface, we take that very seriously. Going forward, we want to avoid them in the future and do as much as we can to do so.
As Harashima-san just said, the management, they need to handle both management and governance, and the two sides need to be balanced as management manages each business. In that sense, for those incidents that we have seen, risk culture, risk management has to be there at group company level. The sensitivity has to be enhanced on the group level. Sensibility and sensitivity both need to be raised. Also, there has to be sensibility and sensitivity to risks that has to be cultured at group level. Of course, enhancing the governance level is an endless endeavor.
Regarding Taiwan, regarding Australia, every time it occurs, what we have done specifically is that we do risk management and corporate governance. In the past, right now, and also going forward, we have exercised those, and that's the most important aspect of business that we take very seriously. We just need to sharpen those senses and also always think about how we can assist the GCs, the enhancement of ERM. There is no one right way, but we want to be enhancing the maturity level going forward. What Muraki-san said previously, it was mentioned in the material that the insurance business, within the insurance business, I have talked about what we do going forward. Okada-san mentioned that the fee business with the Zenrosai cooperation. I have also said that our Chief Digital Officer, Mr. Namatame, and there is Moriwaki-san in charge of strategy.
Using technology, there could be some technology-driven products and services that we can offer. Also something to become a new pillar of business, some new businesses. We will not rush, of course, but then for sure, we need to be building these major columns of business, and we have to see when they start to make profit contribution. This is an important point as we work towards the future. That concludes my answer to your question. Thank you.
Thank you.
Watanabe-san from Daiwa Securities.
This is Watanabe from Daiwa. I have two questions. My first question is on page 24 of the handout, medium and long-term target. Quantitative target- In line with the global peers. Do you have a plan for that? You had a target of DPS, and I think at the end of the day, you came up with a quantitative number of 50%. So my question is on quantitative target. My next question is EPS growth rate per share. That was set up as a KPI, but has your stance towards buyback changed? My question is on capital level adjustment.
My second question is on page 10 about inflation risk. Thank you very much for sharing us the details. On the left-hand side, what you show on the left-hand side is the weighted average of impact of inflation. Inflation risk ratio. What do you mean by that? Is that potential inflation risk or takeup within the impact? What is the breakdown amongst the three? What is the ratio? If you have a figure, I very much appreciate. So those are my two questions.
Thank you very much for your two questions. Long-term target, we have a particular direction, but do we have a milestone? Do we have a particular numerical target? Do we have any plans to coming up with that? Also, our ideas on buyback, has that changed or not? I want to ask our Chief Financial Officer, Kenji Okada, to respond to that question. The second part of your question was on inflation. Part of it is domestic, but this is a section that focuses on international business. Therefore, I would like to ask Akira Harashima, Co-Head of International Business, to respond to that part of the question.
Thank you for your question. Starting with a quantitative target for EPS growth, as Satoru Komiya alluded to earlier, maintaining, keeping world top-class EPS growth, that is the context in which we are talking about coming up with the income target under the next midterm plan. At this point in time, we do not have specific figures, but by referring to this qualitative target, we will align our expressions in the next midterm plan. We will be deliberating on that. From the perspective enhancing EPS, for us, EPS growth is something that will be achieved through steady profit growth. Therefore, doing buyback for the sake of raising EPS, that is not our intention. When it comes to medium and long-term target, JPY 500 billion, 12%, it was in 2017 or so that we came up with that target. We did not elaborate when we plan to achieve that.
We were just focusing on the number of JPY 500 billion, 12%, and every time we came up with a midterm plan, we came up with numerical targets, quantitative targets. This is not a major change, but what I think is that the midterm plan and long-term target. This long-term target, we are in the insurance business, so what kind of position do we want to be assuming? That is the long-term plan. Midterm plan is about a specific figure or maybe a target that we want to achieve within the three years. We are living in a time of uncertainties, and so long-term target is more about a direction going forward. When it comes to specific numerical target, we will be zooming in into three years or for this current year.
Numerical targets will be shared within the context of a midterm plan or for guidance for this particular year. Let me move on to the second part of your question on inflation.
Thank you very much for your question. Page 10, bottom right. If you take a look at bottom right of page 10, there is a footnote at the bottom where it says star 1, asterisk 1. The bar graph on the left-hand side is described here. As you can see, our North American business reserves balance by line, and the inflation risk ratio is. This inflation risk ratio comes from Dowling & Partners. They have a particular factor for that, and we are applying that to our portfolio which sort of shows the extent of the inflation risk that we have within our own portfolio.
We are referring to these numbers to show how much we are exposed to inflation risk. It is not that these are incurred or we are actually exposed to such risks or that it is realized. That is not how to see these numbers.
Next question, Sato-san from Mizuho. Actually, yes. Please wait for the microphone.
Thank you very much. My name is Sato from Mizuho Securities. I have one question. I repeat, I apologize, but ROE mid to long-term target. Personally, medium to long-term ROE, discussing that by the definition of adjusted ROE that you have now, I wonder if that is the right thing to do. Because IFRS, when you look at it that way, wouldn't the gap widen because business-related equities about the capital gain from business-related equities is included, and also the life insurance profit will get expanded. But then other than that, the overall ROE must be low. When you want to compare yourself versus the global peers, wouldn't that become one of the factors to widen the gap in between you and the overseas players? Have you considered that? Still setting this for the ROE growth.
Also, the second point is that the profit forecast for international business, its feasibility half year ago in the North American business, I asked you the same question that isn't it too lenient, and you answered that there is FX gain, and so the number became inflated. Then, a stretched reasonable target can now be set, perhaps. In the emerging markets, for the past 10 years, it has been said that it is a growing market. However, the profit is actually flattish. If you just look at their performance, not much growth. Then CAGR 10% growth is what you expect, and therefore, what is the background to that? Also, do you have any credible, trustworthy backup to what you say?
So ROE target. So adjusted ROE, the definition that we use today, revisiting that definition, IFRS switch might happen. While those assumptions change, we are not really setting the target based on those IFRS changes and other factors that may change. From Chief Financial Officer, Mr. Okada, he will answer that. For the international business, for the Europe and U.S. businesses, and for the emerging markets, do we have a stretched plan as of the plan? For the emerging markets, what is the growth situation right now? From Harashima-san second, so first will be from Okada-san.
This is Okada speaking. Thank you for your question. As you say, in 2023, Europe companies will use IFRS. This is a mandatory application of IFRS in Europe, and so the global top-class EPS, or relevant to the global peer level ROE, they will be switching to IFRS. I am sure they will be changing some of their KPIs.
Gradually, that new information is coming out from those players. As for our introduction of IFRS, we have not really decided on that yet. However, for Tokio Marine, it's only going to be a voluntary introduction of IFRS. For KPIs and management benchmark, we need to be analyzing IFRS first, and then compare to the European peers who will already be switching to IFRS. We need to be comparing ourselves versus them, and we need to see if we are comparable or whether if it's clear for the market to understand. The numbers that we are showing this time, this is not including the IFRS switch, but it's based on the current definition. This is our intent that we want to be raising ROE and EPS growth.
In the next midterm plan, by the time we have to announce it, then we will know more about the peer companies, and then we will have our next growth plan and also the numerical targets attached to it.
Next will be from Harashima-san.
Sato-san, thank you very much for your question. First, regarding the North American businesses, as Sato-san said, you're saying that the plan might be too conservative. In 2022, I will tell you why the numbers are being, there's upside to the performance. As external environment in 2022, when we created the plan, the assumptions are moving in a direction that would be favorable to us. So there's positive impact. The first is the lengthening of the hardened market. In 2020, when we created the plan, the hard market, the slowdown was expected. However, as you know, the hard market still continues.
That is a favorable factor for the underwriting profit. The second point is the rise in the interest rate and also the magnitude of the interest rate hike, which is more than what we had anticipated. On this point, the investment income has received a positive impact, and this is the second point. The third point is that when we created the plan, we were not including the reversal of the reserve. However, in 2022, because performance was so good, and therefore there was some reversal of about JPY 15 billion in North America included in this year's plan, and this is also another part of the upside. The biggest one, everything I have said, other than those at each group company level, the underwriting profit expansion was the biggest mandate, and we've been saying that for some time.
Expansion of underwriting profit, a lot of old companies worked very hard towards that, and we are now seeing the fruit of our labor in 2022. Those are the four points why there is upside in the numbers for the international business. It's not that the original plan was too conservative. That is not my understanding. Going on to the emerging markets, they are not achieving growth in the emerging markets. On that point, if you go to page 57, if you go to the second one from the top, it says that for the CAGR is 31% from the actual in 2020. However, during the midterm plan for the emerging markets, there has been some volatility versus the plan. The reason for that is COVID-19.
In the emerging markets, we had auto insurance as the main product, and when there is lockdown with COVID, there is less accident, the result improves. Once it goes back, it goes back to the normal scenario. The earnings had been volatile versus the underlying capability of each GCs. However, within this, if you go to the upper right, there is Brazil. In Brazil, profit in 2021 was JPY 8.6 billion. In 2022, it was JPY 12.1 billion. So against this backdrop, this entity has grown its profit. As Komiya-san just explained, the joint venture with Caixa, it kicked off well. There are some difficulties unique to emerging markets, but we would like to be growing the emerging market businesses. We believe that we can be growing emerging market businesses. Does that answer your question?
Yes. Thank you very much.
Are there any other questions?
UBS, Okada-san.
This is Okada from UBS. I have two questions. My first question, again, is on ROE. Sorry for insisting. Page 25, ROE beyond 2023. In looking at this chart in 2023, flat, and ROE is expected to pick up after 2024 according to this table. Komiya-san said profit base is JPY 600 billion in 2023, and there will be profit added to that from the domestic business. Taking that into account, the fact that according to this chart, ROE is flat in 2023 seems to be conservative. Does that reflect uncertainty in the economic environment? Is that reflected in this? I would like to confirm that. Beyond 2024, ROE, according to this graph, is going to pick up. If you could give some color to that is very much appreciated. If I could continue with my second question. This is on page 10 on social inflation.
I want to follow up on that. You have reserves by inflation. In terms of amount, how much reserves do you have set aside, and what are your thoughts on reversal and building the reserves for social inflation? Surely you have reserved in fiscal 2021, that has been disclosed. If you could give us a breakdown by lines of business, how should we view and expect the reversal of the reserves by line of business? Also, the level of satisfaction of the reserves, to what extent do you think it is sufficient? If you could share with us your thinking on that is very much appreciated.
Thank you for your questions. Again, it was a question on ROE. Again, I want to ask our Chief Financial Officer, Okada-san, to respond to the question. Inflation. The sheet that was taken up earlier. Reversal and setting aside of provisions, and do we have enough reserves, and what is the rationale for that? I want to ask Harashima-san to take that question. Starting with Okada-san.
Thank you. The graph on page 25 does not necessarily reflect the reality. My apologies for that. It is not an accurate reflection. In 2022, from the beginning of the year, we have been saying that we will be eyeing a couple of years ahead. In that sense, ROE is expected to pick up going forward. Is it going to flatten out, or is it going to be growing strongly? We were not anticipating that. Therefore, this graph is not an actual capture of what we were planning. We were expecting 12% this year, but now on a normalized basis, 13.3% is the ROE level. As Komiya-san said, 2023, assuming the foreign exchange stays at this level and achieve profit of JPY 600 billion, this dot on the graph should be higher than where it is. That is the view that we have for 2023 and beyond.
Thank you.
Harashima-san.
Thank you very much, Okada-san, for your questions. With regards to the amount of reserve, my apologies, I am not able to share that detail. But the bar graph that you see, as I explained earlier, does not show the percentage of actual reserve. It shows the loss reserve by estimated inflation type and ratio of inflation risk. When it comes to reserve or setting aside of provision, we believe that we have sufficient provisions. How much are we going to reverse? How much are we going to build? That is not something that we will share with you today, and nothing is decided at this moment. As with regards to adequacy of reserves, we have outside third-party auditors who audit every year, and reserves are set aside as a result of third-party audit. Therefore, it is not only internal view, but external third-party view is reflected.
While talking about reserves, there are reserve committees, for example, there is always a third-party expert involved in that. There is also a CIA or Chief Actuary, Dan Thomas, who is overseeing group companies from a holding side perspective. Dan Thomas, who is the Chief Actuary, I will not be able to share details, but he thinks that sufficient and appropriate level of reserves is set aside. That is the view that is shared by the management team. Also talking about ROE, we will need to scrutinize more in order to come up with a more specific number for 2023. That is something that we will share when we come up with our plan. As I said earlier, we want to maintain a sense of speed in raising our ROE. We will make sure to address this properly. I hope that answers your question.
Thank you.
Thank you. Any other questions from the floor first? Sakamaki-san from Nomura Securities, please.
My name is Sakamaki from Nomura. I have one question. The portfolio in and out strategy, you are reviewing your portfolio, you said. Large scale M&A, it is quite difficult to be executed, so you are focusing more on bolt-on, et cetera. In Canada, in Taiwan, also this morning, you made an announcement, so it is hard to really have an image that those will expand your profit level significantly. Expansion through those levels of M&A, is that really possible? Also, is it possible to really expand your business in areas other than North America? Could you comment on that from the perspective appropriate management of your business portfolio?
In the presentation, I have shared with you my view and M&A centering around the international market. Harashima-san will first answer your question.
Sakamaki-san, thank you for your question. As Komiya-san explained, if you go to page 32, it talks about our in and out strategy. For the large scale M&As, as Komiya-san said, right now, the valuation tends to be high. When you look at the multiples, PBR for the listed U.S. companies, it is around 1.8 multiples, so this is even higher than the pre-COVID level. Therefore, for large scale M&As, we need to be patient, we just have to wait for the right moment.
We are not simply sitting and waiting. Of course, we have a long list and short list that we manage, we are constantly studying the potential targets. When there is an opportunity, we are ready to go and deploy and grab the chance when the time is right. On the other hand, for large scale M&As, when there are scarce opportunities, we need to be doing the bolt-on M&As and build on the cases of bolt-on M&As one after another.
Sakamaki-san mentioned that the bolt-on, the size of the value is small, but the return is also relatively small in line with the value we pay. By accumulating those bolt-on cases, we think that is what we need to be doing now. It was mentioned that in Delphi, Komiya-san mentioned the acquisition of Standard Security Life, which is an example of a bolt-on acquisition. When we did the bolt-on, the profit that they have generated in 2022 is more than what we had expected at the time of acquisition. In a similar manner, we need to be gathering more of those cases.
The size of one case may be small, but we will be accumulating multiple cases of such. This is the in part of the in and out. As explained on page 32, we also need to be doing what we describe on the lower half of the slide, which is the out strategy. Where it is shaded in blue, Highland, which is a construction insurance agency that was divested and also the run-off of the Tokio Marine Kiln reinsurance assuming business. We are replacing the portfolio in this manner so that it will be well-diversified, and we will be able to have a higher profitability in the business with the existing portfolio. That is a turnaround that we will continue to do with IN&OUT.
As Harashima-san answered, that is the status quo.
Therefore, this is now the time to be patient. For M&A, this is only the means, it is not the objective on its own, and we need to remind ourselves of that. Although it may not be visible from the outside, there is a continuous effort in M&A, such as managing long list versus short list, and also networking in different corners of the world, et cetera. All those are being done. As described on page 32, there are three principles in M&A that we have to keep and make sure risk-return is satisfactory. Those are multiple points that we need to keep in mind as we wait patiently. I hope that answered your question.
Thank you very much.
Niwa-san from Citi.
Thank you for taking my question. Talking about new fee business and shareholder return, these two are my questions. First, I am on page 19. It is kind of an overlap of what you have already covered, but if you could give some color. Multiple lines of business or areas that you expect to be promising going forward. Long-term, JPY 6 billion, you say, but the potential of this market, I believe, is quite significant. Could it expand by 10x or more? If you could elaborate and give some color on that. With regard to shareholder return, in some European players and some life insurers in Japan, cash generation capability kind of communication, I think, is being seen these days. Cash generation or reimbursement or sending of cash from group companies.
Adjusted net income is kind of easy to understand, but I have a sense that maybe you can increase shareholder returns. Remittance or how much cash generation potential do you think you have?
Thank you very much. The first question on fee business, the Kokumin Kyosai example is shown on this page. What are our plans and how do we intend to do that? I want to ask Wada-san to respond to that. Also to supplement that, in pursuing digital strategy, we talk about disaster risk reduction. I want to ask Namatame-san to refer to that. The second part of your question was on share buyback, remittance ratio from our subsidiaries. What is our thinking? What is our view? I want to ask Okada-san, our Chief Financial Officer, to respond to that. Wada-san, followed by Namatame-san.
Niwa-san, thank you for your question. This is Wada speaking. The collaboration with Kokumin Kyosai with severe intensification of natural catastrophe these days and outlook for shrinking market, we had come together to contemplate what we can do together. We have come to a point where finally we are able to make this announcement that we have been contemplating over years. Within the non-life business, the claim service area, there is investigation and also things that we can work together, like loss adjustment and so forth. The benefit for us is the loss adjustment business can be monetized. This, I think, is quite significant. It is a fee business. It will not be impacted by natural catastrophes, and therefore, it would stabilize our business. Another point is using digital to make our business and operations more efficient. We are able to monetize that impact in real terms.
What I mean by that is that there will be people who will be seconded from us, and therefore, personnel cost and the system usage cost, basically JPY 6 billion approximately, will be reflected to our profit base. Multiple lines, multiple areas. Do we have specific ideas on that? Actually, we do not. If we are able to monetize claim service area, this is an area that we then plan to explore going forward. I will ask Namatame-san to respond in detail on the other areas. Disaster risk reduction, that is an area that we can contribute, like BCP or TCFD disclosure. We offer consulting services for some customers. Those are some areas that we want to explore to grow. That is all from me.
Namatame-san?
This is Namatame speaking. Niwa-san, thank you very much for your questions. How are we going to expand our business area, new business areas, and how are we going to generate added value? We intend to leverage digital capabilities, and that will be the key, and that is why we are pursuing digital strategy. Some initiatives that have already been announced, such as disaster risk reduction, creating that into a business, CORE, which is a consortium for that, and also utilizing data and turning that into a fee business. The third example is embedded insurance. It is a new fee-led insurance business to be created. Those are areas that we expect could become pillars of our business, and therefore we are working on those areas. If I could dwell on that, CORE in disaster risk reduction, our partner.
We are using our partner's data to use that for disaster risk reduction and for customers, not only delivering added value to insurance products, but also adding additional service value by contributing to social challenges. Already 80 companies or more have joined this consortium, and we are working to commercialize this business. This is announced through the media, but the remote sensing technology is used for disaster risk reduction or real-time hazard map to be developed. In times of hazards, real-time risk information could be sent to the people, residents in the community. We believe that this could be commercialized, and we are willing to build new pillars of business. Talking about fee business using data. For example, a dashcam data could be leveraged, and the dashcam data will be used for business operators to operate more safely, and that could also be introduced as part of a fee business.
Maintaining repair and management using data in order to offer safety instructions, safety consultations. This is being planned for implementation. The third point is the Singapore company, bolttech, that we have invested recently. The company is working on embedded insurance. It is a good example of fee business. The structure of embedded insurance is rolled out globally by bolttech. By collaborating with bolttech, we are thinking of launching a fee business and to incorporate their capabilities into our capabilities. We have already started to collaborate with international companies. That is all for me. I am hoping that we will be able to make visible announcements to you as soon as possible. I hope you would look forward to that. Thank you.
Okada-san?
Thank you for your question. Remittance for the group, the current situation and our thinking. As you correctly pointed out, for our group, the group's growth strategy and the shareholder return and to improve the capital efficiency, the dividend to be received in a stable manner from group companies is critical. Apart from TMNF, other subsidiaries, basically, 80% of net income of that year will be used in order to determine the dividend that we receive. We will take various factors into consideration, but that is the principle. To a certain extent, the profit will be retained, but over the medium and long term, excess capital could be retained, and therefore, once every three years, anything that is in excess of what is necessary will be remitted to the holdings in the form of special dividend.
As for TMNF, dividend that we receive from other group companies, above and beyond that, we receive funding for shareholder returns. So that is the form in which we receive return or remittance from TMNF. Is there any progress in terms of comparative study with global peers? Well, more than 10 years ago, when we decided on the amount of remittances, it was more towards a dividend that is above and beyond the capital level. Global peers are operating, the cycle management is put in place, and therefore receiving dividend is appropriate in my view. So the way in which I have described is put in place since 2021.
Now from telephone. It is past 5:00 P.M., but we would like to continue. We have a question from telephone. Tsujino-san from Mitsubishi UFJ Morgan Stanley, please ask your question.
First, if I go to page 18, the loss ratio improvement fire is JPY 37 billion, but then with the rate increase, I think it was 16.5. Other than that, product revision, et cetera, result measures loss prevention. So I want to know what you are doing specifically, and is this possible to be done just within one year? If that is possible, then every year, are we going to be seeing similar benefits one year after another? If it is being done with fire insurance, then what is happening with auto? Because there are some things which I think you should be doing in auto, such as changing the unit price, et cetera.
How much room do you have in improving other lines of business in a similar manner as what you describe here in fire? Next is North America. There were some specific product introductions referring to North America today. But then in HCC, once it goes inside, we do not really know what is increasing, what kind of products are selling well, et cetera. For example, in agriculture, I think it was one of the things that they had, agricultural insurance. So what are the lines that are increasing? What kind of lines are popular? For the high market share products such as D&O, surety, are those growing even more? When your market share becomes too high, that might become a concern for you. So within HCC, I just want to know which areas are increasing and which products are popular right now.
Tsujino-san, thank you for your question. So on the first point about the profitability improvement in fire, the values are written and what are you doing specifically in order to see those, and can that be applied to other lines of business such as auto? So whatever you can explain along that line, from Hosojima-san, please will answer your question. From Harashima-san, he will refer to the HCC situation, replacement of business lines, market portfolio, replacement of products, et cetera. Or it could be added by Yamamoto-san sitting in the back. So that will be the second part of your question. So first and foremost, Hosojima-san, please answer your question.
This is Hosojima speaking. Tsujino-san, thank you for your question. So the JPY 37 billion, this number, if you go to page 16, you will find the same number on page 16. This is the level of improvement. For fire line of insurance, there have been multiple price hikes that we have executed. Through three price hikes, we have seen profitability improvement. As you can see on page 16, the benefit has been accumulating.
Other than that, we have done some result measures such as for the bad result customers, loss prevention measures, and also limiting the underwriting for those high claim customers, and also the cost of reinsurance, controlling the reinsurance side of the business. These are some of the measures that we have done comprehensively. Of course, creating attractive products and selling attractive products and making profit was all done at the same time. In a similar manner, can we apply this to other lines of business such as auto?
Well, at the TMNF overall, we want to keep the 92% level of combined ratio in a stable manner, and the less volatile line of business is auto. For auto, we want to keep 95% or below level of combined ratio. So far, we are within the target range, and therefore, we are not really thinking of doing any major price hikes beyond this point. But if the accident frequency increases or if inflation exacerbates, then in a flexible manner, we would have to be adjusting the rates in order to protect the profitability. As for auto insurance, of course, we need to be doing the loss prevention Drive Agent, which is a drive recorder, drive cam, in order to reduce accident by customers. So we will continue doing that.
Other loss prevention measures, there have to be some comprehensive measures for auto in order to improve the profitability of auto. That concludes my answer.
So Tsujino-san, there is Shinichi Hirose, the Chief Executive Officer of Tokio Marine & Nichido Fire. He will be adding some words.
Tsujino-san, thank you for your question. Let me just add something here. About the profitability improvement for fire, as Hosojima-san mentioned, on the product side, we have done a lot of things. We are working on them now. If you go to page 18 on the left, there is a digital investment to improve business efficiency. As we create more digital systems, this works to improve efficiency, but it also helps to help the loss ratio. In one area, for example, the fraud detection by AI and also for the malintended repair shops, eliminating those by using AI.
Also we have accurate data analysis capability within the system. So we will be able to pick up the high-quality policies versus bad quality policies and use that data for underwriting. Also for large-scale disasters, we use satellite photos to do the loss adjustment, but we will continue to do that by taking photos, aerial photos, and to discern the quality of each property that we underwrite. So digital investment and DX will also be used in improving the profitability of fire as well as profitability in other lines of business. That concludes my additional comment to her question. So to some exceptional customers, we are spending some cost and we are spending some labor to that. But now that has been replaced by digital technology partly.
Next from Akira Harashima, he will follow up with the second part of your question.
Tsujino-san, thank you very much for your question. If you go to page nine. On page nine, we are showing what Komiya-san has explained previously. In case of HCC, broadly, there is U.S. business and then they also have what they call international business. That is other than U.S. business. They have two categories. The U.S. business is growing for HCC, but in between the two, a rapid pace of growth is being achieved by international segment by HCC. This is outside of U.S., as I said. For international business, there is a high growth potential and the profitability is good, and therefore this is an area that they want to grow. That is why on page 9, we are showing you the graph of how this part of their business is growing.
Within that, for different lines of business included for the new underwriting in surety and through bolt-on, there is renewable energy and marine-related underwriting, which they are newly underwriting. On the other hand, if you go to a different slide, if you go to page 64. If you go to page 64, on the left side, there is a product composition in pie chart. This product composition at HCC, they have a variety of products. They have a wide array of products, and so this is what makes their portfolio. For the international part of their business, or if you look at the U.S. business, if you look at the left side, it says medical stop-loss. In this kind of an area, this is a highly profitable business, and also it is insulated from the rate cycle and its short tail.
This is one of the areas that they are growing right now. For agriculture or crop, because of its exposure to natural catastrophes, they are not growing this significantly. If you go to the middle of the slide at the very bottom, it says additional risk-taking. Here you can see some of the lines where there is additional risk-taking. These are the areas where we have high expectations for growth, but the markets are always changing. Right now we are proactive in those lines of business. It may not be the case 1 year later from now because market changes depending on the situation. We need to be nimble, and we need to be going to areas where we think can be profitable. For those areas that will be declining, we need to be reducing its portion in the portfolio.
Within HCC, the portfolio change, portfolio replacement is being done so that the profitability is stable and they can grow their profit.
Tsujino-san said, "Do we have any concerns where market share may be too high?" Look at the U.S. and global market. The market size is very big. There are various players. There are no areas where our market share is too high. Unfortunately, we do not have such lines of business where market share is too high, so we should not be too concerned about that. Within HCC, there is diversification within HCC. That is a part of the business. Diversification within HCC or diversification within group, we are having various discussions over how to diversify the portfolio. I hope that answered the question.
Yes. Thank you very much.
Thank you. JP Morgan Securities, Otsuka-san is also online.
Thank you. This is Otsuka. Thank you for taking my question. I have two questions, but they are quite separate, so I want to ask you to take one at a time. First question is on page 26, EPS growth. Page 24 and page 25 shows long-term targets. I think you are looking at the global peers, at least that's how the graphs and explanations are given. But on page 26, it doesn't talk about global peers on this page. Before you used to talk about global peers, but on page 26, you're not particularly looking or eyeing global peers. That's my first question.
Let me ask Okada-san to respond to that question.
Thank you for the question. As was explained earlier, we want to grow EPS growth on par with global peers, and as a result, we will see DPS growth. In terms of shareholder return, eyeing our global peers, when we came up with a medium and long-term plan, we wanted to achieve a payout ratio on a par with global peers, and that was the 50% that we have in mind. For 2023, from the beginning of the year, we will base a 50% payout ratio in determining our shareholder dividend for next year. As you see on the slide, from 2018- 2020, these numbers will be out of the scope, and therefore, 2022 numbers will be included. Therefore, the payout ratio on par with global peers will be maintained. As a result, we want to grow EPS.
That is what we intend to continue in terms of growing DPS on par with our global peers. I hope that answers your question.
Yes. Thank you very much. My second question is on pages four and five. Actual on page four, and normalized basis on page five. True enough, as you show on these slides, if you take out transient factors of JPY 560 billion, but actual and normalized basis numbers have a significant gap. This significant gap, is it not a problem? The reason why I'm asking this question is, let's say, for example, on page 4, JPY 130 billion COVID in Taiwan, in international business, JPY 96 billion in loss, natural catastrophes come and go every year. But initiatives to minimize these factors, I think, need to be implemented.
Don't you have to implement it? That's my question. Thailand was actually responded by Harashima-san earlier. Domestic natural catastrophes, and as described in this deck, fire rate improvement has improved the profit, and also diversification in the domestic business to grow specialty business. If you could elaborate a little bit on the sense of speed that you would like to take.
Thank you for your question. Transient factors are quite significant, and you focused on COVID Taiwan, and I've explained that already. We have drawn lessons from that, and I thought I've elaborated already by responding to some of the questions. ERM, risk management, and improving our risk countermeasures. It's an endless journey. We have to continue to work on it. With regards to COVID, from the time we've found out, we have taken all measures that we can. You also talked about domestic natural catastrophes. How are we going to address domestic natural catastrophes? Let me ask Hosojima-san for that.
Also revisiting the domestic portfolio. We will be revisiting the portfolio for the domestic market. Talking about the sense of speed, I would like to ask Wada-san to respond to that part of the question. Starting with Hosojima-san.
Yes, Otsuka-san, thank you very much for your question. This is Hosojima speaking. Fire profitability improvement. If you could please turn to page 16 since it's about Nat cat. From the time we created the midterm plan, and we said that the beginning of the next midterm plan, fire should have enough profit that would cover loss costs. But taking out the transient effect, we are on track against our plan. As you see in the graph on top right of page 16, we have accelerated, brought forward the timing of achieving profitability commensurate to capital cost.
We are on schedule, or actually ahead of our schedule in achieving that. So of course, from the perspective of risk control, how to make use of reinsurance is a key, especially now that we're in a hard market in the reinsurance market. We need to achieve economic rationale to make sure that we have appropriate reinsurance arrangement in place. Volatility will need to be suppressed, and also profitability and fire, both will be sought. That will be all for me.
This is Komiya speaking. Let me supplement. I completely agree with what Hosojima-san just mentioned, but intensifying natural catastrophes is something that we need to watch very carefully in the meantime. At the beginning of the year, we come up with a budget of natural catastrophes, but if we exceed that guidance, we would need to be watching very carefully. If there is an intensifying natural catastrophes, if needed, we would need to revise the product lineup, underlying policy, and also rates. As was mentioned by Namatame-san earlier, we need to perhaps step up our effort on the disaster risk reduction aspect. From the perspective that was just already mentioned, we will continue with our initiatives. That was a supplementary comment from me. This was Komiya-san speaking. As for portfolio management for domestic insurance business, Wada-san.
Wataru-san, thank you very much for your question. This is Wada speaking. If you could please open up page 18 of the slide deck. Where it says top line growth, top line expansion in this current midterm plan, a JPY 10 billion increase in profit contribution for specialty insurance. On the right-hand side, you see the plan up till 2026. CAGR +1% addition and profit contribution approximately JPY 15 billion. A major part of this comes from specialty insurance. Auto will be virtually flat, we expect, and therefore, specialty will be the area where we can expect growth. Specialty insurance, as you know very well, is immune to natural catastrophe impact, and I think it's about JPY 700 billion, but we want to bring it to the next level in the next midterm plan.
The midterm plan beyond that, we are hoping to achieve such a level, and that is what we have in mind. Coming back to the point that was briefly mentioned earlier, the Kokumin Kyosai co-op collaboration, the fee business. This is also an area which basically is not affected by natural catastrophes. That is also an area that we want to grow. While natural catastrophes are intensifying, we want to minimize the impact as much as possible.
This is Komiya speaking. This is not only for the domestic market. My view of the matter is that the existing lines of business or products and existing market and business productivity, profitability, we need to bring that to the next level and to a higher level. Also specialty business, specialty insurance. Since we have new emerging risks, we will be developing new products for that. We have a verification cycle to address that, and the fee business in order to respond to the needs of our customers, and also new business areas. Our business structure may need to be transformed. We need to be addressing both sides in that regard, and that is how we are addressing the overall situation. I hope that answers your question.
Yes, indeed. Thank you. My personal view, if I may, is coming back to your point, Komiya-san, intensifying natural catastrophes. As a leader in the industry, I hope you will lead the discussions in this area. Natural catastrophes are intensifying every year, and whether it is in one time or transient or is it normalized, we are having this endless discussion. I am looking forward to your leadership in the industry.
Thank you for that.
Thank you. Since we have hit the time that we had from you, we must conclude soon. Last words of conclusion from Komiya-san.
Thank you very much for gathering here today. As I said, right now, we are at a turning point. That is what we realize where we are to be. So in terms of growth as well as expansion of business areas and also enhancement of governance, we need to be balancing all of them. Also improving efficiency and productivity. Also, although it may take time, we want to get into new businesses, and we need to be doing all that with speed. With that background, we said that there are two things we need to be doing. First is the EPS growth, the global top-class EPS growth, and I said that it is a moving target.
We have received many comments from you on this. Regarding ROE, we want to bring ROE to the level equivalent to global peers, and we will be working on various initiatives towards that goal. While we communicate with you on regular basis, we would like to ask you to give us your candid comments or your opinions so that we want to continue with this fruitful dialogue with all of you. We want to bring in your views into how we run the business. Once again, thank you for coming here today, and I ask for your continuous support towards Tokio Marine Group.
This concludes the Investor Relations explanation meeting for the second half of fiscal year 2022. Once again, we thank you for your participation despite your busy schedule. This is the end of the meeting.